Estimating returns to education: The control function approach

Abstract views: 195 / PDF downloads: 114




Labor Markets, Mincer Wage Equation, Education, Semiparametric Regression Model, Control Function Approach, Endogeneity


This study aims to evaluate the effect of schooling years on wage level in Turkey by using the Mincer wage equation. This function is used as the baseline for the investigation of earnings determinants. For this purpose, the relationship between wage and education level of people is estimated by using a semiparametric regression model considering the control function approach. Various variables such as education level, experience, gender and marital status are estimated separately in the wage model by utilizing the Household Budget Statistics micro data set of 2017 in Turkey obtained by the Turkish Statistical Institute. The parametric model does not clarify the model clearly when functional form of relation is not known. To overcome this drawback, semiparametric regression model, which contains parametric and nonparametric variables, can be successfully applied. This model is extended by adding the 1997 education reform as a control variable. The achieved semiparametric test results from this study showed that there is a positive relationship between schooling years and wage level. On the other hand, control function approach results indicate the existence of fluctuant progress for the effect of schooling years on the wage level along the period.


Download data is not yet available.


BASKAYA, Y.S. & HULAGU, T. (2011). Informal-Formal Worker Wage Gap in Turkey: Evidence from A Semi-Parametric Approach. 51st Congress of the European Regional Science Association: "New Challenges for European Regions and Urban Areas in a Globalised World", 30 August - 3 September 2011, Spain, Barcelona: European Regional Science Association (ERSA), Louvain-la-Neuve.

BHULLER, M., MOGSTAD, M. & SALVANES K.G. (2017). Life-Cycle Earnings, Education Premiums and Internal Rates Of Return. Journal of Labor Economics. 35(4), 993-1030.

BIRCAN, F. & TANSEL, A. (2006). Inequality in the Wages of Male Wage Earners in Turkey 1994–2002: A Quantile Regression Analysis. XX Annual Conference of the European Society for Population Economics, 22–24 June 2006, Verona, Italy.

BLACK, D., KOLESNIKOVA, N. & TAYLOR, L. (2011). Earnings Functions When Wages and Prices Vary by Location. Journal of Labor Economics. 27(1), 21-47.

ÇAĞLAYAN AKAY, E. & KANGALLI UYAR, S.G. (2017). Estimation of the Mincerian Wage Equation in Turkey: A Semiparametric Approach. International journal of Economic Perspective. 11(2), 225-237.

GABBRIELLINI, C. (2015). The Determinants of the Italian Wages. Thesis (PhD). Universita di Pisa Dıpartımento Dı Economıa E Management.

GAUTAM, K.R. (2020). Role of Education and Training on Labor Earning: A Case Study of Nepal. Thesis (MS). KDI School of Public Policy and Management.

GIBBONS, J.D. (1976). Nonparametric Methods for Quantitative Analysis. New York: Holt, Rinehart and Winston.

GÜRİŞ, S. & ÇAĞLAYAN, E. (2012). Returns to Education and Wages in Turkey: Robust and Resistant Regression. Quality and Quantity. 46,1407-1416.

HALVORSEN, R. & PALMQUIST, R. (1980). The Interpretation of Dummy Variables in Semilogarithmic Equations. American Economic Review, 70(3), 474-475.

HECKMAN, J.J., LANCE, J.L. & TODD, P.E. (2008). Earnings Function and Rates of Return. Journal of Human Capital. 2(1).

HENDERSON, D.J., POLACHEK, S.W. & WANG, L. (2011). Heterogeneity in Schooling rates of Return. Economics of Education Review, 30(6), 1202-1214.

KEELE, L.J. (2008). Semiparametric Regression for the Social Sciences. UK: John Wiley Sons.

KHARBANDA, V. (2014). Three Essays on the Labor Market. Thesis (PhD). Graduate College of The University of Iowa.

LEE, M.J. (1990). Semiparametric Estimation of Technical Efficiency in Electric Utilities. No. 5-90-7.

MARTINS, P. S. & PEREIRA P. T. (2004). Does Education Reduce Wage Inequality? Quantile Regression Evidence from 16 Countries. Labour Economics, 11, 355– 371.

MINCER, J. (1974). Schooling, Experience, and Earnings. Human Behavior & Social Institutions No. 2.

MURPHY, K. M. & WELCH, F. (1990). Empirical Age-Earnings Profiles. Journal of Labor Economics, 8(2), 202-209.

NEWEY, W. K., POWELL, J.L. & VELLA, F. (1999). Nonparametric Estimation of Triangular Simultaneous Equation Models. Econometrica, 67(3),565-603.

OZABACI, D., HENDERSON, D. J., & SU, L. (2014). Additive Nonparametric Regression in the Presence of Endogenous Regressors. Journal of Business & Economic Statistics, 32(4), 555–575.

PATRINOS H. A., PSACHAROPOULOS, G. & TANSEL, A. (2021). Private and Social Returns to Investment in Education: The Case of Turkey with Alternative Methods. Applied Economics, 53(14), 1638-1658.

SELTZER, A. & FRANK, J. (2007). Promotion Tournaments and White Collar Careers: Evidence from Williams Deacon’s Bank, 1890-1941. Oxford Economic Papers, 59, 49-72.

TANSEL, A. (1994). Wage Employment, Earnings and Returns to Schooling for Men and Women in Turkey. Economics Education Review, 13(4), 305–320.

TANSEL A. & BODUR B. F. (2012). Wage Inequality and Returns to Education in Turkey: A Quantile Regression Analysis. Review of Development Economics, 16(1), 107– 121.

TUIK (2022). Hanehalkı Bütçe İstatistikleri Mikro Veri Seti. Ankara: Türkiye İstatistik Kurumu.

ULRICK, S.W. (2007). Measuring the Returns to Education Nonparametrically. Applied Economics Letters. 12,1005-1011.

VURAL, B.M. & GÜLCAN, Y. (2008). Impact of Education on Individual Earnings in Turkey. International Journal of Economic Perspectives. 2(3), 124-132.




How to Cite

Çelik Keçili, M., & Esen, E. (2022). Estimating returns to education: The control function approach. JOURNAL OF APPLIED MICROECONOMETRICS, 2(1), 9–18.



Original Article