A Test Of The Validity Of The Screening Hypothesis Versus The Human Capital Theory Using The Wu-Hausman Specification Test For Endogeneity

Abstract

This paper tests for the validity of the screen hypothesis. The Wu-Hausman specification test for endogeneity is conducted by estimating a Mincerian semi-log earnings equation with two different years of schooling measures included as independent variablesone exogenous, and one endogenous. It is found that the exogenous formulation of years of school helps to explain the variance of the natural logarithm of earnings, while the endogenous formulation does not. These results indicate that schooling is used as a screening device.