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What is it About Schooling That the Labor Market Rewards? The Components of the Return to Schooling

Author

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  • Cyril Pasche

    (Department of Economics and “Leading House on the Economics of Education”, University of Geneva)

Abstract

Research on determining what it is about schooling that the labor market rewards is scarce. This paper shows that when specifically controlling for schooling cognitive skills (i.e. the capacity to process information and apply knowledge) and not cognitive skills as a whole, a considerable share of the return to schooling is constituted of cognitive skills. This contrasts with previous research that strongly favored noncognitive skills (i.e. behavioral and personality traits) as the key component of the return to schooling. Results show schools are a place where one acquires, or is sorted, on a knowledge and a behavioral criteria in similar shares. Findings also suggest that cognitive skills acquired in school are considerably more likely to be rewarded than their non-schooling counterpart. This effect may be attributed to the signaling value of schooling. Such conclusions give weight to current policies that employ cognitive skill tests to asses schooling quality.

Suggested Citation

  • Cyril Pasche, 2008. "What is it About Schooling That the Labor Market Rewards? The Components of the Return to Schooling," Economics of Education Working Paper Series 0029, University of Zurich, Department of Business Administration (IBW).
    • Handle: RePEc:iso:educat:0029
    as

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    File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0029_lhwpaper.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Schooling; Cognitive and noncognitive skills; Wages; Rate of return; Omitted variable bias; Signaling;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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