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Returns to Education through Access to Higher-Paying Firms: Evidence from US Matched Employer-Employee Data

Author

Listed:
  • Niklas Engbom
  • Christian Moser

Abstract

We use administrative US matched employer-employee data merged with detailed information on individuals' academic records to assess the extent to which returns to education are mediated by the sorting of workers across firms. We present three results. First, we confirm findings in the earlier literature of large pay differences across higher education degrees. Second, we show that up to one quarter of pay premiums for higher degrees are explained by between-firm pay differences. Third, higher degrees are associated with greater representation at the best-paying firms. We conclude that employer heterogeneity is an important factor in mediating the returns to education.

Suggested Citation

  • Niklas Engbom & Christian Moser, 2017. "Returns to Education through Access to Higher-Paying Firms: Evidence from US Matched Employer-Employee Data," American Economic Review, American Economic Association, vol. 107(5), pages 374-378, May.
    • Handle: RePEc:aea:aecrev:v:107:y:2017:i:5:p:374-78
    Note: DOI: 10.1257/aer.p20171013
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    Citations

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    Cited by:

    1. Peydró, José-Luis & Jasova, Martina & Mendicino, Caterina & Panetti, Ettore & Supera, Dominik, 2021. "Monetary Policy, Labor Income Redistribution and the Credit Channel: Evidence from Matched Employer-Employee and Credit Registe," CEPR Discussion Papers 16549, C.E.P.R. Discussion Papers.
    2. Jorge Alvarez & Felipe Benguria & Niklas Engbom & Christian Moser, 2018. "Firms and the Decline in Earnings Inequality in Brazil," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 149-189, January.
    3. Cardoso, Ana Rute & Guimaraes, Paulo & Portugal, Pedro & Reis, Hugo, 2018. "The Returns to Schooling Unveiled," IZA Discussion Papers 11419, Institute of Labor Economics (IZA).
    4. Balogh, Gábor & Sipos, Norbert, 2019. "Pályakezdő közgazdászok bére a szakdiverzifikáció függvényében [Programme diversification effects on the salaries of freshly graduated economists]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 551-577.
    5. Pan, Weixiang, 2025. "Firm-specific pay premia and the returns to higher education: Evidence from community colleges," Labour Economics, Elsevier, vol. 93(C).
    6. Manuel Macera & Hitoshi Tsujiyama, 2018. "Frictional Labor Markets, Education Choices and Wage Inequality," 2018 Meeting Papers 827, Society for Economic Dynamics.
    7. Pedro Portugal & Hugo Reis & Paulo Guimarães & Ana Rute Cardoso, 2023. "What lies behind returns to schooling: the role of labor market sorting and worker heterogeneity," Working Papers w202322, Banco de Portugal, Economics and Research Department.
    8. Xiaodong Chen & Ding Li & Pengyu Zhu, 2025. "Long-term impacts of historical education policy on wages in China: insights on over-education," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-22, December.
    9. Manuel Macera & Hitoshi Tsujiyama, 2024. "Inequality and technological change," Quantitative Economics, Econometric Society, vol. 15(2), pages 427-451, May.
    10. Cook, Nikolai, 2024. "Increasing student access through aid: Differences in difference-in-differences estimates," Economics Letters, Elsevier, vol. 238(C).

    More about this item

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to 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

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