Revisiting Returns to Education in Thailand: Structural Causal Model Framework

Abstract

This paper revisits the causal relationship between education and earnings, or the returns to education, using Thailand’s socio-economic household survey data. We show that, with the minimum modeling assumption, the causal effect of education on earnings can be nonparametrically identified only when there is no unobserved ability affecting both education and earning, and when the selection mechanisms are conditionally independent to earnings conditioning on potential experience and education. The causal effects of education on earnings are estimated using a nonparametric approach with selection bias adjustment and parametric approaches with selection bias and ability bias adjustments. The results show different estimates for returns to education across model specifications, indicating the importance of the bias adjustments and parametric assumptions.