This paper employs conditional second moments to identify the impact of education in wage
regressions where education is treated as endogenous. This approach avoids the use of
instrumental variables in a setting where instruments are frequently not available. We employ
this methodology to estimate the returns to schooling for a sample of Australian workers. We
find that accounting for the endogeneity of education in this manner increases the estimated
return to education from 6 percent to 10 percent.