IDEAS home Printed from https://ideas.repec.org/p/iso/educat/0029.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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 specifically 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 effect 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
    as

    Download full text from publisher

    File URL: http://repec.business.uzh.ch/RePEc/iso/leadinghouse/0029_lhwpaper.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 313-350.
    2. 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.
    3. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1007-1047.
    4. 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.
    5. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25(1), 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, Third Edition," NBER Books, National Bureau of Economic Research, Inc, number beck94-1, March.
    9. Michael F. Charette & Ronald Meng, 1998. "Literacy and Numeracy," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 495-517, August.
    10. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nakabayashi, Masaki, 2011. "Schooling, employer learning, and internal labor market effect: Wage dynamics and human capital investment in the Japanese steel industry, 1930-1960s," MPRA Paper 30597, University Library of Munich, Germany.
    2. Theodore Koutmeridis, 2013. "The Market for "Rough Diamonds": Information, Finance and Wage Inequality," CDMA Working Paper Series 201307, Centre for Dynamic Macroeconomic Analysis, revised 14 Oct 2013.
    3. Hani Mansour, 2012. "Does Employer Learning Vary by Occupation?," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 415-444.
    4. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    5. Paco Martorell & Damon Clark, 2010. "The Signaling Value of a High School Diploma," Working Papers 1248, Princeton University, Department of Economics, Industrial Relations Section..
    6. Mahmut Ablay & Fabian Lange, 2023. "Approaches to learn about employer learning," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(2), pages 343-356, May.
    7. Ireland, Norman & Naylor, Robin A. & Smith, Jeremy & Telhaj, Shqiponja, 2009. "Educational returns, ability composition and cohort effects: theory and evidence for cohorts of early-career UK graduates," LSE Research Online Documents on Economics 28608, London School of Economics and Political Science, LSE Library.
    8. Georg Graetz, 2021. "On the interpretation of diploma wage effects estimated by regression discontinuity designs," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 228-258, February.
    9. Alós-Ferrer, Carlos & Prat, Julien, 2012. "Job market signaling and employer learning," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1787-1817.
    10. Braga, Breno, 2018. "Earnings dynamics: The role of education throughout a worker’s career," Labour Economics, Elsevier, vol. 52(C), pages 83-97.
    11. Fasih, Tazeen & Patrinos, Harry Anthony & Sakellariou, Chris, 2013. "Functional literacy, heterogeneity and the returns to schooling : multi-country evidence," Policy Research Working Paper Series 6697, The World Bank.
    12. Audrey Light & Andrew McGee, 2015. "Employer Learning and the “Importance†of Skills," Journal of Human Resources, University of Wisconsin Press, vol. 50(1), pages 72-107.
    13. Daniel Kreisman & Jonathan Smith & Bondi Arifin, 2023. "Labor Market Signaling and the Value of College: Evidence from Resumes and the Truth," Journal of Human Resources, University of Wisconsin Press, vol. 58(6), pages 1820-1849.
    14. Irma Mooi-Reci & Ronald Dekker, 2015. "Fixed-Term Contracts: Short-Term Blessings or Long-Term Scars? Empirical Findings from the Netherlands 1980–2000," British Journal of Industrial Relations, London School of Economics, vol. 53(1), pages 112-135, March.
    15. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    16. Gaurab Aryal & Manudeep Bhuller & Fabian Lange, 2022. "Signaling and Employer Learning with Instruments," American Economic Review, American Economic Association, vol. 112(5), pages 1669-1702, May.
    17. repec:ehl:lserod:59069 is not listed on IDEAS
    18. Barbara Mueller & Stefan Wolter, 2014. "The role of hard-to-obtain information on ability for the school-to-work transition," Empirical Economics, Springer, vol. 46(4), pages 1447-1471, June.
    19. Audrey Light & Andrew McGee, 2011. "Employer Learning and the “Importance” of Skills," Working Papers 11-02, Ohio State University, Department of Economics.
    20. Frederiksen, Anders, 2010. "Earnings Progression, Human Capital and Incentives: Theory and Evidence," IZA Discussion Papers 4863, Institute of Labor Economics (IZA).
    21. Graetz, Georg, 2017. "Human Capital, Signaling, and Employer Learning: What Insights Do We Gain from Regression Discontinuity Designs?," IZA Discussion Papers 11125, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Schooling; Cognitive and noncognitive skills; Wages; Rate of return; Omitted variable bias; Signaling;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:iso:educat:0029. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sara Brunner (email available below). General contact details of provider: https://edirc.repec.org/data/isuzhch.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.