Parametric and semiparametric estimations of the return to schooling of wage workers in Canada

This project presents estimates of the return to education for wage workers in Canada using 1994 SLID microdata. To correct for non-random sampling, the parametric two-stage estimators of wage equation proposed by Heckman (1974, 1979) and its semiparametric counterparts introduced by Newey (1999) and Robinson (1988) are employed. Specification tests proposed by Horowitz (1993) and Hausman (1978) suggest semiparametric approaches are superior to parametric ones in terms of flexibility (consistency or at least efficiency gains), generality and predictability. The endogeneity problem of schooling is considered and schooling is instrumented by parental education. The estimated return for female paid-workers is 4.4-4.9% and 3.9% for male paid-workers in Canada.