How profitable is to study in Spain? An empirical insight using a new source of information

Abstract

This paper presents empirical evidence on the returns to education in Spain using the Survey on the Quality of Life in the Workplace. Five waves (1999-2003) of the survey have been pooled to build a dataset for which Mincer-type earning functions are estimated. Unlike other analyses experience is computed as actual and not potential experience, and a variable capturing periods of unemployment is also included. We calculate the returns to education for male workers following the simplest Mincer’s specification estimated by (a) OLS and (b) instrumental variables (IV) techniques as a means to deal with endogeneity concerns regarding schooling and find that returns to education for male salaried workers are 5.68 (OLS) and 7.37 (IV with a family background instrument) giving evidence of a slightly declining trend in the rate of return to education in Spain. Evidence against Mincer’s underlying hypothesis of linearity of the returns to education in schooling is found when schooling attainment is taken as qualifications. Concerning the parallelism of log-earnings experience profiles across schooling levels, the inclusion of interaction terms between variables experience and education casts some doubts on the plausibility of this assumption in the private sector, although public sector’s earning-experience profiles are more coherent with it. Moreover unlike previous international and Spanish studies the results provide evidence of larger returns among public employees. The empirical analysis is finally extended by focusing on regional differences, which are found to be large.