Using Unemployment Rates As Instruments to Estimate Returns to Schooling‪.‬

1. Introduction There have been significant societal efforts over time to keep children in school and to encourage people to pursue a college education. The basis of these efforts is the general consensus that schooling helps people develop the necessary skills that will help them compete in the labor market and reduce their chance of experiencing poverty. However, schooling involves an opportunity cost (from foregone earnings, in addition to any direct costs), so that understanding the true returns to schooling would be important for individuals making schooling decisions. Yet, estimating the returns to schooling has proved to be very difficult.