This article investigates whether the returns to education vary with the level of cognitive ability. Unlike much of the literature, this article finds that the return to schooling is lower for those with higher cognitive ability indicating that education can act as a substitute for observed ability. Using quantile regressions we also find that, again unlike most of the literature, returns are higher at lower quintiles of the conditional earnings distribution. This suggests that education is also a substitute for unobserved ability. The policy implications are that increasing education in general and particularly for those with lower ability should reduce income inequality.
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References listed on IDEAS 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.:
Carneiro, Pedro & Heckman, James J., 2003.
"Human Capital Policy,"
IZA Discussion Papers
821, Institute for the Study of Labor (IZA).
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James Heckman & Pedro Carneiro, 2003.
"Human Capital Policy,"
NBER Working Papers
9495, National Bureau of Economic Research, Inc.
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