Abstract
We evaluate Angrist and Krueger (1991) and Bound, Jaeger, and Baker (1995) by constructing reliable confidence regions around the 2SLS and LIML estimators for returns-to-schooling regardless of the quality of the instruments. The results indicate that the returns-to-schooling were between 8 and 25 percent in 1970 and between 4 and 14 percent in 1980. Although the estimates are less accurate than previously thought, most specifications by Angrist and Krueger (1991) are informative for returns-to-schooling. In particular, concern about the reliability of the model with 178 instruments is unfounded despite the low first-stage F-statistic. Finally, we briefly discuss bias-adjustment of estimators and pretesting procedures as solutions to the weak-instrument problem.
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