Returns to Education: The Causal Effects of Education on Earnings, Health, and Smoking

This paper estimates returns to education using a dynamic model of educational choice that synthesizes approaches in the structural dynamic discrete choice literature with approaches used in the reduced-form treatment effect literature. It is an empirically robust middle ground between the two approaches that estimates economically interpretable and policy-relevant dynamic treatment effects that account for heterogeneity in cognitive and noncognitive skills and the continuation values of educational choices. Graduating from college is not a wise choice for all. Ability bias is a major component of observed educational differentials. For some, there are substantial causal effects of education at all stages of schooling.