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Alternative Instruments for Institutional Quality and the Effect of European Settlements on Economic Development

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Author Info
Kevin Denny (University College Dublin)
Vincent O'Sullivan (University College Dublin)

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Abstract

This paper uses cross section data to investigate whether education and ability are substitutes or complements in the determination of earnings. Using a measure of cognitive ability based on tests taken at ages 7 and 11 we find, unlike most of the existing literature, clear evidence that the return to schooling is lower for those with higher ability indicating that education can act as a substitute for observed ability. We also estimate quantile regression functions to examine how the return to schooling varies across the conditional distribution of earnings. The results show that the return is lower for higher quantiles, suggesting that education is also a substitute for unobserved ability.

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File URL: http://www.ucd.ie/economics/research/papers/2004/WP04.20.pdf
File Format: application/pdf
File Function: First version, 2004
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Publisher Info
Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200420.

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Length: 11 pages
Date of creation: 07 Jun 2004
Date of revision:
Handle: RePEc:ucn:wpaper:200420

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Postal: UCD, Belfield, Dublin 4
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Web page: http://www.ucd.ie/economics
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Related research
Keywords: earnings; education; ability;

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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  1. 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, . [Downloadable!] (restricted)
  2. McKinley L. Blackburn & David Neumark, 1991. "Omitted-Ability Bias and the Increase in the Return to Schooling," NBER Working Papers 3693, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Samuel Bowles & Herbert Gintis & Melissa Osborne, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December. [Downloadable!] (restricted)
  4. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, And Ability: Evidence From A New Sample Of Identical Twins," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 253-284, February. [Downloadable!] (restricted)
    Other versions:
  5. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January. [Downloadable!] (restricted)
  6. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. John Cawley & James Heckman & Edward Vytlacil, 1998. "Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education," NBER Working Papers 6388, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Blackwell Publishing, vol. 17(2), pages 115-156, 04. [Downloadable!] (restricted)
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