On the Size of Sheepskin Effects: A Meta-Analysis

Abstract

The degree equation was first developed by Hungerford and Solon in 1987 and is usually known as the “sheepskin effect equation”. Under the sheepskin hypothesis workers are rewarded not only for the productive-enhancing contribution of schooling, but also for obtaining the diploma that comes with completing a particular level of schooling. In consequence, wages will rise faster with extra years of schooling when the extra years also convey a diploma. Using crosssectional data, Hungerford and Solon (1987) found that there is a return for each year of education and an additional significant return on the years during which a diploma or degree is earned. Since then many studies have been carried out to test the hypothesis and measure the sheepskin effect. For our review most of this research was completed in Brazil (29.51%), the United States (24.59%), and Colombia (10.66%).