Returns to education in Spain: Some evidence on the endogeneity of schooling

Abstract

In this article, rates of return to education for Spanish male employees are calculated and compared using different methods. We derive rates of return from the estimation of three alternative models of human capital. The rates of return obtained by each of these models are different when they are calculated by least squares. Nevertheless, when the endogeneity of education is considered, the rates of return obtained from each of these models are approximately the same, reaching a value close to 9%. In addition, we compute internal rates of return on investments in education. We find that, on average, social returns are about two points lower than private ones.