Returns to College Education Reexamined: Individual Treatment Effects, Selection Bias, and Sorting Gain

In reexamining earnings return to college education, we consider and compare a Mincer-type productivity model and a Heckman-type selection model with essential heterogeneity. We apply the two methodological approaches to an empirical setting in a transitional economy that has recently experienced a rapid expansion in higher education: contemporary Taiwan. Our empirical results reveal substantial individual heterogeneity in the Taiwanese data used. Not only do we find profound gender differences, but heterogeneity within women. Among women, the downward biases in the Mincer coefficient for both the average treatment effect (ATE) and the effect for the treated (TT) are statistically significant. The results show that women’s schooling decisions are based on unobserved gains. Female college attendees would be much worse off if they had not gone to college.