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The Role of Mathematical and Verbal Skills on the Returns to Graduate and Professional Education

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  • Song, Moohoun
  • Orazem, Peter F.
  • Wohlgemuth, Darin

Abstract

Students in majors with higher average quantitative GRE scores are less likely to attend graduate school while students in majors with higher average verbal GRE scores are more likely to attend graduate school. This sorting effect means that students whose cognitive skills are associated with lower earnings at the bachelor’s level are the most likely to attend graduate school. As a result, there is a substantial downward bias in estimated returns to graduate education. Correcting for the sorting effect raises estimated annualized returns to a Master’s or doctoral degree from about 5% to 7.3% and 12.8% respectively. Estimated returns to professional degrees rise from 13.9% to 16.6%. These findings correspond to a large increase in relative earnings received by postgraduate degree holders in the United States over the past 20 years.

Suggested Citation

  • Song, Moohoun & Orazem, Peter F. & Wohlgemuth, Darin, 2007. "The Role of Mathematical and Verbal Skills on the Returns to Graduate and Professional Education," Working Papers 7346, Iowa State University, Department of Economics.
    • Handle: RePEc:ags:genres:7346
    DOI: 10.22004/ag.econ.7346
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    Cited by:

    1. MORIKAWA Masayuki, 2012. "Postgraduate Education and Human Capital Productivity in Japan," Discussion papers 12009, Research Institute of Economy, Trade and Industry (RIETI).
    2. Fumihiko SUGA, 2017. "The Returns to Postgraduate Education," ESRI Discussion paper series 336, Economic and Social Research Institute (ESRI).
    3. Adriana Camacho & Catherine Rodríguez & Fabio Sanchez, 2022. "Does financial aid for top international graduate programs boost education and earnings? Evidence from Colombia," Documentos CEDE 20124, Universidad de los Andes, Facultad de Economía, CEDE.
    4. Masayuki Morikawa, 2015. "Postgraduate Education and Labor Market Outcomes: An Empirical Analysis Using Micro Data from Japan," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(3), pages 499-520, July.
    5. Park, Seonyoung, 2011. "Returning to school for higher returns," Economics of Education Review, Elsevier, vol. 30(6), pages 1215-1228.
    6. Song, Moohoun & Orazem, Peter F. & Wohlgemuth, Darin, 2008. "The role of mathematical and verbal skills on the returns to graduate and professional education," Economics of Education Review, Elsevier, vol. 27(6), pages 664-675, December.
    7. MORIKAWA Masayuki, 2013. "Postgraduate Education, Labor Participation, and Wages: An empirical analysis using micro data from Japan," Discussion papers 13065, Research Institute of Economy, Trade and Industry (RIETI).
    8. Stevenson, Adam, 2013. "The male–female gap in post-baccalaureate school quality," Economics of Education Review, Elsevier, vol. 36(C), pages 153-165.
    9. Koichiro Onishi & Sadao Nagaoka, 2020. "Graduate education and long‐term inventive performance: Evidence from undergraduates' choices during recessions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 465-491, July.
    10. Busso, Matias & Montaño, Sebastián & Muñoz-Morales, Juan S., 2024. "Unbundling Returns to Postsecondary Degrees and Skills: Evidence from Colombia," IZA Discussion Papers 17283, Institute of Labor Economics (IZA).
    11. Veronica Minaya & Judith Scott-Clayton & Rachel Yang Zhou, 2024. "Heterogeneity in Labor Market Returns to Master’s Degrees: Evidence from Ohio," Research in Higher Education, Springer;Association for Institutional Research, vol. 65(5), pages 775-793, August.
    12. Fumihiko Suga, 2020. "The returns to postgraduate education in Japan," The Japanese Economic Review, Springer, vol. 71(4), pages 571-596, October.
    13. Fan, Jing-bo & Zhang, Cheng-gang, 2015. "A study of the rate of return to higher engineering education in China," International Journal of Educational Development, Elsevier, vol. 42(C), pages 106-114.

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    Keywords

    Labor and Human Capital;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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