A Model of Educational Attainment Application to the German Case

Abstract

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0206.pdf Non technical summaryThis article develops a model of educational attainment which is imbedded in the human capital theory, the reference theory for the economic analysis of issues related to education. The principle of this model is that there is a finite number of possible educational alternatives which may be ordered by level. Each educational alternative yields a certain utility to the individual. The net utility of an educational alternative is expressed in terms of the difference between the "returns" and the "costs" associated with this alternative for any individual with specific characteristics and constraints. The individual chooses, given his specific constraints or characteristics, to attain the education level which maximises his net utility.In its simplest version, the formalisation of these assumptions leads to an ordered probit model where the threshold values are given by the expected ratio of the marginal costs to the marginal returns. In other words, the individual assesses the marginal costs and the marginal returns associated with the next higher education level, and if the ratio of the former to the latter, given his characteristics, is below a certain threshold, he will opt for the next higher level. In a second step, the educational process is decomposed into two stages: achievement at school and post-school achievement. The same conceptual framework applies at both stages, but a correlation is permitted between them. Empirically, this boils down to estimate a multivariate ordered probit model, where we have one equation for secondary education and as many post-secondary education equations as there are secondary school degrees. The model makes it possible to investigate whether some factors exert a different influence depending on the stage in the educational process, and whether timevariant factors also play a role.An illustration based on German data shows how this model functions in practice. The explanatory variables used are the traditional ones encountered in the literature on educational attainment: cohort dummies and variables depicting family background. Differences across genders in the parameters have been systematically tested. The example of an application of the basic version of the model shows that it is very easily estimable empirically, while providing an economic interpretation framework which makes sense in economic terms. The application of the decomposition of the educational c...

Family Background, Cohort and Education: A French-German Comparison

“…This implies that we find an appropriate way to model and estimate this empirically. This paper is an application of the model developed in Lauer (2002). In a first step, section 3 analyses the impact of some essential factors on final educational attainment in France and Germany, and in a second step, section 4 go into more detail in the educational process and decomposes the ultimate educational outcome into school and post-school educational attainment, taking problems of dynamic selectivity into account.…”

Education and Wage Inequality in Germany: A Review of the Empirical Literature

“…case is based on the fact that (in the U.S.) each time after having completed one educational Lauer (2002a;2003b) the educational process is decomposed into two steps (secondary and post-secondary level education), where the choices at both levels may be correlated.…”

“…According to Lauer (2002a;2003b) parental education and the father's occupation have a significant impact on educational attainment, where blue collar workers' children are the most "disadvantaged" group and managers' children have the highest outcome. Estimating successive educational stages yields that parental education is also important for post-school educational attainment though to a lesser extent.…”

“…Lauer ( According to Lauer (2002a;2003b) estimating the ordered probits yields higher thresholds for women, i.e. given the family background and cohort, females seem to expect lower returns or higher costs related to education so that their investments in education are lower than those of males.…”

Heterogeneous Returns to Training an Analysis with German Data Using Local Instrumental Variables

“…Among others, also Blundell, Dearden and Sianesi (2005) have noted the importance of allowing for (observable) heterogeneity in returns to education. Selection into training may depend much more on individuals' ability and motivation than does selection into schooling, where family background characteristics are the main determinants (Ammermüller, 2004;Lauer, 2002). Also, training costs and maybe even training returns are more obvious and hence may play a more crucial role for the decision to take part in training than for the schooling decision.…”