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Identifying The Role Of Cognitive Ability In Explaining The Level Of And Change In The Return To Schooling

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  • James Heckman
  • Edward Vytlacil

Abstract

This paper considers two problems that arise in determining the role of cognitive ability in explaining the level of and change in the rate of return to schooling. The first problem is that ability and schooling are so strongly dependent that it is not possible, over a wide range of variation in schooling and ability, to independently vary these two variables and estimate their separate impacts. The second problem is that the structure of panel data makes it difficult to identify main age and time effects or to isolate crucial education-ability-time interactions which are needed to assess the role of ability in explaining the rise in the return to education. 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • James Heckman & Edward Vytlacil, 2001. "Identifying The Role Of Cognitive Ability In Explaining The Level Of And Change In The Return To Schooling," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 1-12, February.
  • Handle: RePEc:tpr:restat:v:83:y:2001:i:1:p:1-12
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    References listed on IDEAS

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    1. John Cawley & Karen Conneely & James Heckman & Edward Vytlacil, 1996. "Cognitive Ability, Wages, and Meritocracy," NBER Working Papers 5645, National Bureau of Economic Research, Inc.
    2. 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 521-544, July.
    3. 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.
    4. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    5. Rubinstein, Y. & Tsiddon, D., 1998. "Coping with Technological Progress: the Role of Ability in Making Inequality so Persistent," Papers 27-98, Tel Aviv.
    6. Chamberlain, Gary & Griliches, Zvi, 1975. "Unobservables with a Variance-Components Structure: Ability, Schooling, and the Economic Success of Brothers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 422-449, June.
    7. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    8. 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.
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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