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12 We investigated the sensitivity of the distribution of required schooling levels to the CPS waves used to construct the requirements.
The instrumental variables approach requires a valid instrument for required schooling in addition to the usual instrument for schooling.
When required schooling is entered linearly into the regression there is in practice no difference between natives and immigrants.
Less than 1% of the observations used in our analysis correspond to an occupation where the required schooling would differ when using this alternative measure.
In the fixed effect approach, the returns to schooling are identified off of individuals changing jobs with different required schooling levels, and, in particular, switching across matched, undereducated and overeducated jobs.
In the augmented wage regressions, penalties for current and past overeducation are still present and even larger, with overeducated workers receiving negligibly small returns from their years of schooling beyond the required schooling level.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com