  This paper considers the use of instruments to identify and estimate private
and social returns to education within a model of employer learning. What an
instrument identifies depends on whether it is hidden from, or transparent
(i.e., observed) to, the employers. A hidden instrument identifies private
returns to education, and a transparent instrument identifies social returns to
education. We use variation in compulsory schooling laws across non-central and
central municipalities in Norway to construct hidden and transparent
instruments. We estimate a private return of 7.9%, of which 70% is due to
increased productivity and the remaining 30% is due to signaling.
