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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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  • John Cawley
  • James Heckman
  • Edward Vytlacil

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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Bibliographic Info

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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Publication status: published as Meritocracy and Economic Inequality, Arrow, Kenneth, Samuel Bowles, and Steven Durlauf, eds., Princeton: Princeton University Press, 2000.
Handle: RePEc:nbr:nberwo:6388

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  1. Richard J. Murnane & John B. Willett & Frank Levy, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," NBER Working Papers 5076, National Bureau of Economic Research, Inc.
  2. Heckman, James & Scheinkman, Jose, 1987. "The Importance of Bundling in a Gorman-Lancaster Model of Earnings," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 243-55, April.
  3. 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.
  4. 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.
  5. 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, .
  6. John Cawley & Karen Conneely & James Heckman & Edward Vytlacil, 1996. "Cognitive Ability, Wages, and Meritocracy," NBER Working Papers 5645, National Bureau of Economic Research, Inc.
  7. Jeff Grogger & Eric Eide, 1995. "Changes in College Skills and the Rise in the College Wage Premium," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 280-310.
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