James J. Heckman, John Eric Humphries, Sergio Urzua, Gregory Veramendi

Using a sequential model of educational choices, we investigate the effect of educational choices on labor market, health, and social outcomes. Unobserved endowments drive the correlations in unobservables across choice and outcome equations. We proxy these endowments with numerous measurements and account for measurement error in the proxies. For each schooling level, we estimate outcomes for labor market, health, and social outcome. This allows us to generate counter-factual outcomes for dynamic choices and a variety of policy and treatment effects. In our framework, responses to treatment vary among observationally identical persons and agents may select into the treatment on the basis of their responses. We find important effects of early cognitive and socio-emotional abilities on schooling choices, labor market outcomes, adult health, and social outcomes. Education at most levels causally produces gains on labor market, health, and social outcomes. We estimate the distribution of responses to education and find substantial heterogeneity on which agents act.

JEL Codes
C32: Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
C38: Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Factor Models
I12: Health Production
I14: Health and Inequality
I21: Analysis of Education
early endowments
factor models
treatment effects