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The Evolution of the Returns to Human Capital in Canada, 1980-2006

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Author Info
Boudarbat, Brahim
Lemieux, Thomas
Riddell, Craig

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Abstract

This paper examines the evolution of the returns to human capital in Canada over the period 1980-2006. Most of the analysis is based on Census data, and on weekly wage and salary earnings of full-time workers. Our main finding is that the returns to education increased substantially for Canadian men between 1980 and 2000, in contrast to conclusions reached in previous studies. For example, the adjusted wage gap between men with exactly a bachelors’ degree and men with only a high school diploma increased from 34 percent to 43 percent during this period. Most of this rise took place in the early 1980s and late 1990s. Returns to education also rose for Canadian women, but the magnitudes of the increases were more modest. For instance, the adjusted BA-high school wage differential among women increased about 4 percentage points between 1980 and 1985 and remained stable thereafter. Results based on Labour Force Survey data show the upward trend in returns to education has recently been reversed for both men and women. Another important development is that after fifteen years of expansion (1980-1995), the return to work experience measured by the wage gap between younger and older workers declined between 1995 and 2000. Finally, we find little difference between measures based on means and those based on medians of log wages for both genders. Also, the use of broader earnings measures (such as including self-employment earnings, using weekly earnings of all workers, or using annual earnings of full-time workers) does not alter the main conclusions from the analysis based on weekly wage and salary earnings of full-time workers.

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Paper provided by UBC Department of Economics in its series UBC Departmental Archives with number craig_riddell-2008-15.

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Length: 45 pages
Date of creation: 22 Oct 2008
Date of revision: 22 Oct 2008
Handle: RePEc:ubc:bricol:craig_riddell-2008-15

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Keywords: Human Capital; Wage Differentials; Returns to Education; Canada;

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  1. Ana M. Ferrer & W. Craig Riddell, 2002. "The role of credentials in the Canadian labour market," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 879-905, November. [Downloadable!] (restricted)
  2. Bar-Or, Yuval, et al, 1995. "The Wage Premium to a University Education in Canada, 1971-1991," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 762-94, October. [Downloadable!] (restricted)
  3. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Paul Beaudry & David A. Green, 2000. "Cohort patterns in Canadian earnings: assessing the role of skill premia in inequality trends," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 907-936, November. [Downloadable!] (restricted)
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  5. Peter Kuhn & A. Leslie Robb, 1998. "Shifting Skill Demand and the Canada-US Unemployment Gap: Evidence from Prime-Age Men," Canadian Public Policy, University of Toronto Press, vol. 24(s1), pages 170-191, February. [Downloadable!] (restricted)
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  6. Mincer, Jacob & Polachek, Solomon, 1974. "Family Investment in Human Capital: Earnings of Women," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S76-S108, Part II, . [Downloadable!] (restricted)
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  7. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Richard B. Freeman & Karen Needels, 1993. "Skill Differentials in Canada in an Era of Rising Labor Market Inequality," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 45-68 National Bureau of Economic Research, Inc. [Downloadable!]
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  9. J.B. Burbidge & L. Magee & A.L. Robb, 2001. "The Education Premium in Canada and the United States," Quantitative Studies in Economics and Population Research Reports 364, McMaster University. [Downloadable!]
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  10. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-60, September.
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  11. Jacob Mincer & Solomon Polacheck, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 397-431 National Bureau of Economic Research, Inc. [Downloadable!]
  12. Paul Beaudry & David Green, 1998. "What is Driving US and Canadian Wages: Exogenous Technical Change or Endogenous Choice of Technique?," NBER Working Papers 6853, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Kevin M. Murphy & W. Craig Riddell & Paul M. Romer, 1998. "Wages, Skills, and Technology in the United States and Canada," NBER Working Papers 6638, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Joshua Angrist & Victor Chernozhukov & Iván Fernández-Val, 2006. "Quantile Regression under Misspecification, with an Application to the U.S. Wage Structure," Econometrica, Econometric Society, vol. 74(2), pages 539-563, 03. [Downloadable!] (restricted)
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