Non-linearities in the Returns to Education in Mexico

Now online

Garcia-Moreno, Vicente & Patrinos, Harry Anthony, 2013. “Non-linearities in the Returns to Education in Mexico,” The Empirical Economics Letters 12(6): 593-597.

Previous findings of non-linearities in the returns to education are cited as
evidence of sheepskin effects. But recent evidence from Mexico suggests otherwise. The returns to schooling by year are quite linear, this showing little evidence of sheepskin effects.

The returns to education increase discontinuously. This shows three things:

1. The returns to schooling rise non-linearly
2. There is some evidence of diploma effects at years associated with degrees, such as 6, 9 and 12.
3. But there are large and sometimes larger earnings effects associated with non-diploma years.

Returns to schooling and step sizes are presented in Figure 1. Although previous findings of non-linearities in the returns to education are cited as evidence of sheepskin effects, evidence from Mexico suggests otherwise. The returns to schooling by year are found to be quite linear; this implies little evidence of sheepskin effects.

Therefore, schooling continues to be a good investment.