Premium or penalty? Labor market returns to novice public sector teachers

It is unclear whether public sector teachers are under or overpaid relative to other occupations because we generally lack knowledge on teachers’ outside labor market options or other unobserved attributes related to compensation. We document causal labor market returns to public sector novice teachers in Colombia. In 2004, Colombia introduced a national, standardized, teacher-screening exam, scores on which determine eligibility for public sector teaching jobs relative to an exogenous cutoff point. We combine four nationwide administrative data sources in a regression discontinuity approach to document the labor market returns and outside options of recent education college graduates who take the screening test. Applicants who marginally pass the teacher screening test have annual earnings that are 15, 20 and 28 percent greater during the first three years of tenure, respectively, relative to those of applicants below the passing cutoff. Part of the earnings premium stems from the fact a substantial fraction of public sector teachers hold an outside, predominantly nonteaching job in the formal sector. The total earnings effect is the combination of greater labor supply during the first three years of tenure in the main teaching job and outside jobs and higher daily wages.

Economista y Magister en economía de la Universidad de Los Andes. Se ha desempeñado como profesor asistente en la Universidad de la Salle y como Catedrático en la Universidad de los Andes y Universidad de la Sabana. Realiza investigación en temas de Educación Superior, Mercado Laboral, Productividad y Comercio Internacional. Ha trabajado como Investigador Adjunto en el BID, Georgetown, Universidad de los Andes y EAFIT. Actualmente trabaja como Científico de Datos en el Banco Mundial.