Selection Bias and the Degree Effect

This paper evaluates the evidence for a college degree effect-a particularly high return to completing college compared to the first three years-in the National Longitudinal Study of the High School Class of 1972 (NLS-72). An ordered probit model of schooling choice is developed to correct for selection bias. If conventional exclusion restrictions are adopted, selection bias does not appear to account for the degree effect. However, use of Leamer's (1978, 1982) extreme bounds analysis shows that the results are very dependent on acceptance of the exclusion restrictions used to identify the model.