What is it About Schooling That the Labor Market Rewards? The Components of the Return to Schooling
AbstractResearch on determining what it is about schooling that the labor market rewards is scarce. This paper shows that when speci…cally 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 e¤ect 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.
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Bibliographic InfoPaper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Economics of Education Working Paper Series with number 0029.
Length: 31 pages
Date of creation: Jun 2008
Date of revision:
Schooling; Cognitive and noncognitive skills; Wages; Rate of return; Omitted variable bias; Signaling;
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
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-EDU-2008-06-21 (Education)
- NEP-HRM-2008-06-21 (Human Capital & Human Resource Management)
- NEP-LAB-2008-06-21 (Labour Economics)
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