Increasing Returns to Schooling by Ability? A Comparison Between the US and Sweden
AbstractThis study uses US survey data (NLSY) and Swedish register data to estimate the relationship between returns to schooling and ability for each country separately. A significant and positive relationship is found for Sweden but not for the US. The purpose is to propose an explanation for why such differences might occur. While many studies have focused on whether credit constraints result in inefficiencies in the schooling market, this study answers the opposite question: whether weak credit constraints lead to inefficiencies, in other words in an overuse of the schooling system. It is argued argue that the US schooling system more effectively sorts out education investments with a low rate of return to schooling than the Swedish schooling system. Therefore, an imperfect allocation of individuals going to higher education in Sweden makes a relationship between returns to schooling and ability observable in Sweden but not in the US. Since the relationship between returns to schooling and ability is the same when the schooling systems of the two countries is similar, that is at lower levels of education, it is indicative of the fact that this explanation may be correct. Of course, the empirical findings in this study are not convincing evidence on their own, but the findings suggest and agree with such an explanation.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2011:17.
Length: 26 pages
Date of creation: 16 May 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
More information through EDIRC
Cognitive ability; return to schooling; credit constraints;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-30 (All new papers)
- NEP-EDU-2011-05-30 (Education)
- NEP-LAB-2011-05-30 (Labour Economics)
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.:
- Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
- Juan Castro & Gustavo Yamada, 2012. "“Convexification” and “Deconvexification” of the Peruavian Wage Profile: A Tale of Declining Education Quality," Working Papers 12-02, Departamento de Economía, Universidad del Pacífico, revised Apr 2012.
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