These include the consequences of changes in the intensity of resources devoted to schooling through such factors as class size and teacher training and remuneration, the implications of greater school choice and increased competition among schools, the role and implications of various forms of testing of students, and the significance of peer effects. [...] The estimated average rates of return in the population reflect both the causal effect of schooling on productivity and earnings and the average return to the unobserved ability of the well-educated. [...] This policy change is also likely to be independent of the unobserved factors such as ability and motivation that influence the level of education the individual would choose in the absence of such laws. [...] The second – and perhaps more fundamental – reason why the OLS and IV estimates may differ is that in the presence of heterogeneity in the net benefits of additional education across individuals the OLS and IV estimates measure different things. [...] The LATE is an estimate of the expected rate of return that would be experienced by an individual chosen at random from the subset of the population affected by the intervention.