Association for Public Policy Analysis & Management

There is ample evidence that college education has a positive and significant effect on earnings. However, there are two main shortfalls. First, there is relative less evidence of the long term effects of college education, in particular regarding areas not related to the labor market such as children's outcomes and inter-generational mobility. Secondly, evidence of the effects of college education comes mostly from the United States or Europe.  One can expect that college education would be beneficial in other socioeconomic contexts, thus it is important to consider the magnitude of the effect in these setups. In particular, it is relevant to analyze how college education contributes to the empowerment of underprivileged groups, such as women in developing countries, as this evidence is needed for the design of policy and aid mechanisms for developing countries.

In this paper, I exploit variation from a unique natural experiment in Ecuador to identify the long term effects of college education on labor and living conditions outcomes of its recipients and their children. In 1970, under a dictatorial government, Ecuador closed Universidad Central, its leading national public university, for a period of one academic year. At that time, this university was regarded as the best of the country and distances in Ecuador are short which implies that events regarding this university located in the capital affected the schooling decisions of individuals all over the country. Thus, the closure of the university diminished the availability of college education for the cohort born in 1951 that was supposed to enter college in 1970. It is plausible that when the university closed, some individuals chose other paths, such as entering the labor force or marrying, and did not returned once the university reopened. This implies that individuals of this cohort on average have lower college education than those from cohorts not affected by the closure of the university. Preliminary first stage results show that the closure of Universidad Central decreases the probability of attending college for the 1951 cohort by approximately one percentage point, significant at the 1% level (F>10). Since the closure of Universidad Central was the arbitrary whim of a dictator, it is not correlated with factors that affects long term labor, living conditions and intergenerational outcomes, hence it is a valid instrument for college attendance.

Using this estimation strategy and data from Ecuador's 2001 National Census, I find that college attendance has a positive long term effect on women’s labor market participation. Individuals who attended college are 60 percentage points more likely to work. There is no effect in the intensive margin. Also, preliminary results suggest that cognitive factors explain the majority of this effect, as college attendance has no effect on non-cognitive factors as marriage and number of children.  Further work will center on estimating the effect of college education on the quality of living conditions (including home ownership) and children's college decisions.