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Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education

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Author Info
John Cawley
James Heckman
Edward Vytlacil

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Abstract

This paper examines the contribution of the rise in the return to ability to the rise in the economic return to education. All of the evidence on this question comes from panel data sets in which a small collection of adjacent birth cohorts is followed over time. The structure of the data creates an identification problem that makes it impossible to identify main age and time effects and to isolate all possible age-time interactions. In addition, many education-ability cells are empty due to the stratification of ability with educational attainment. These empty cells or identification problems are literature and produce a variety of different estimates. We test and reject widely used linearity assumptions invoked to identify the contribution of the return to ability on the return to schooling. Using nonparametric methods find little evidence that the rise in the return to education is centered among the most able.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6388.

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Date of creation: Jan 1998
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Handle: RePEc:nbr:nberwo:6388

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S74-S103, Part II, . [Downloadable!] (restricted)
  2. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier. [Downloadable!] (restricted)
  3. Heckman, James & Scheinkman, Jose, 1987. "The Importance of Bundling in a Gorman-Lancaster Model of Earnings," Review of Economic Studies, Blackwell Publishing, vol. 54(2), pages 243-55, April. [Downloadable!] (restricted)
  4. John Cawley & Karen Conneely & James Heckman & Edward Vytlacil, 1996. "Cognitive Ability, Wages, and Meritocracy," NBER Working Papers 5645, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-66, May. [Downloadable!] (restricted)
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  6. Blackburn, McKinley L & Neumark, David, 1993. "Omitted-Ability Bias and the Increase in the Return to Schooling," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 521-44, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lance J. Lochner & Alexander Monge-Naranjo, 2008. "The Nature of Credit Constraints and Human Capital," NBER Working Papers 13912, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Kevin Denny & Vincent O'Sullivan, 2004. "Can education compensate for low ability? Evidence from British data," IFS Working Papers W04/19, Institute for Fiscal Studies. [Downloadable!]
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  3. Paolo Buonanno, 2003. "The Socioeconomic Determinants of Crime. A Review of the Literature," Working Papers 63, University of Milano-Bicocca, Department of Economics, revised Nov 2003. [Downloadable!]
  4. Flavio Cunha & James J. Heckman & Lance Lochner & Dimitriy V. Masterov, 2005. "Interpreting the Evidence on Life Cycle Skill Formation," NBER Working Papers 11331, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Eric A. Hanushek, 2002. "The Long Run Importance of School Quality," NBER Working Papers 9071, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. M. Christopher Auld & Nirmal Sidhu, 2004. "Schooling, cognitive ability, and health," HEW 0405005, EconWPA. [Downloadable!]
    Other versions:
  7. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Kevin Denny & Colm Harmon & Vincent O'Sullivan, 2004. "Education, earnings and skills: a multi-country comparison," IFS Working Papers W04/08, Institute for Fiscal Studies. [Downloadable!]
  9. Kevin J Denny & Colm P Harmon & Vincent O’Sullivan, 2003. "Functional Literacy, Educational Attainment and Earnings - A Multi-Country Comparison," Working Papers 200319, School Of Economics, University College Dublin. [Downloadable!]
  10. Kevin Denny & Vincent O'Sullivan, 2004. "Alternative Instruments for Institutional Quality and the Effect of European Settlements on Economic Development," Working Papers 200420, School Of Economics, University College Dublin. [Downloadable!]
  11. Philippe Belley & Lance Lochner, 2007. "The Changing Role of Family Income and Ability in Determining Educational Achievement," NBER Working Papers 13527, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. James Heckman & Edward Vytlacil, 2000. "Identifying the Role of Cognitive Ability in Explaining the Level of and Change in the Return to Schooling," NBER Working Papers 7820, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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