IDEAS home Printed from
   My bibliography  Save this article

Changes in Relative Ability as a Determinant of the U.S. College Premium


  • Darius Martin

    (American University of Beirut, Lebanon)

  • Yongli Zhang

    (Central University of Finance and Economics, Beijing, China)


We develop a macroeconomic framework to estimate the importance of fluctuations in relative ability in accounting for trends in the college premium in the United States since 1965. The theoretical scaffolding is a heterogeneous agent model with two dimensions of ability and endogenous schooling choice, with exogenous skill-biased technological change (SBTC), college tuition, and noneconomic social forces. We solve for conditions under which SBTC reduces the relative ability of college educated workers, and show that these conditions are met in the data. We attribute the drop in the college premium over the 1970s to a 25.5% drop in the mean relative quality of college-educated workers from 1968 to 1977. We find that SBTC explains about two thirds of the increase in college attendance since 1965, and that absent both supply shifts and a supply response to SBTC, the relative wage of highly educated workers would have been 77.1% larger in 2013.

Suggested Citation

  • Darius Martin & Yongli Zhang, 2015. "Changes in Relative Ability as a Determinant of the U.S. College Premium," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 7(1), pages 84-110, June.
  • Handle: RePEc:ren:journl:v:7:y:2015:i:1:p:84-110

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    College Premium; Self-Selection; Human Capital;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • 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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ren:journl:v:7:y:2015:i:1:p:84-110. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Jerzy (Jurek) Konieczny). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.