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What is it About Schooling That the Labor Market Rewards? The Components of the Return to Schooling

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  • Cyril Pasche

    () (Department of Economics and “Leading House on the Economics of Education”, University of Geneva)

Abstract

Research on determining what it is about schooling that the labor market rewards is scarce. This paper shows that when speci…cally controlling for schooling cognitive skills (i.e. the capacity to process information and apply knowledge) and not cognitive skills as a whole, a considerable share of the return to schooling is constituted of cognitive skills. This contrasts with previous research that strongly favored noncognitive skills (i.e. behavioral and personality traits) as the key component of the return to schooling. Results show schools are a place where one acquires, or is sorted, on a knowledge and a behavioral criteria in similar shares. Findings also suggest that cognitive skills acquired in school are considerably more likely to be rewarded than their non-schooling counterpart. This e¤ect may be attributed to the signaling value of schooling. Such conclusions give weight to current policies that employ cognitive skill tests to asses schooling quality.

Suggested Citation

  • Cyril Pasche, 2008. "What is it About Schooling That the Labor Market Rewards? The Components of the Return to Schooling," Economics of Education Working Paper Series 0029, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:iso:educat:0029
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    File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0029_lhwpaper.pdf
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    References listed on IDEAS

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    1. Green, David A. & Craig Riddell, W., 2003. "Literacy and earnings: an investigation of the interaction of cognitive and unobserved skills in earnings generation," Labour Economics, Elsevier, vol. 10(2), pages 165-184, April.
    2. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1007-1047.
    3. Glick, Peter & Sahn, David E., 2009. "Cognitive skills among children in Senegal: Disentangling the roles of schooling and family background," Economics of Education Review, Elsevier, vol. 28(2), pages 178-188, April.
    4. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
    5. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
    6. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
    7. Gintis, Herbert, 1971. "Education, Technology, and the Characteristics of Worker Productivity," American Economic Review, American Economic Association, vol. 61(2), pages 266-279, May.
    8. Gary S. Becker, 1994. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition)," NBER Books, National Bureau of Economic Research, Inc, number beck94-1, June.
    9. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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    More about this item

    Keywords

    Schooling; Cognitive and noncognitive skills; Wages; Rate of return; Omitted variable bias; Signaling;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of 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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