Assessing the Effect of Schooling on Earnings Using a Social Experiment

The implementation of the 1950 Swedish comprehensive school reform was preceded by a unique social experiment. During this experiment between 1949 and 1962 the new school system was implemented in stages. This allows us to study the same cohort of individuals going through two different school systems, one of them implying at least one year of prolonged compulsory schooling, in a very similar environment. We use this exogenous variation in educational outcomes to estimate the average returns to education allowing for heterogeneity in the returns across individuals. We also use an ability measure (IQ scores and grades obtained at age 12 or 13) to allow for heterogenous returns to observed ability.