The effect of school inputs on labor market returns that account for selective migration

In this paper, I estimate the effect of state school inputs on labor market returns to schooling. The method follows Card and Krueger (1992) and Heckman et al. (1996), but I extend their analysis in two ways. First, I correct state-level returns to schooling for selective migration, adapting a method from Dahl (2002). Second, I use more recent data and assess the degree to which the 1999 labor market capitalized school inputs (with 2000 Census data). Higher state-level school inputs are associated with higher returns to schooling after correcting for selective migration. These positive effects are present in all Census years I study.