Linearity of the return to education and self selection

This paper investigates the earnings-education profile in Spain. First no functional form is imposed on this relation but instead dummy variables are used for each year of education. Second, different alternatives are analysed until the best parametric form is found. Moreover problems related to the self selection of individuals and to the segmentation of the labour market based on the educational level are considered. The main results indicate that the effect of education on earnings is not significant until individuals finish secondary education and from there onwards the relationship can be considered linear.