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Unobserved Ability, Comparative Advantage, and the Rising Return to Education in the United States: A Cohort-Based Approach

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  • Olivier Deschenes

    (Princeton University)

Abstract

This paper quantities the extent to which the rise in the measured return to education between I979 and 2000 is reflecting a change in the causal effect of education on labor market eamings. The conceptual issues are formalized in a two-factor model of ability. schooling and eamings that allows heterogeneity in absolute and comparative advantage across the population. ln particular, the framework implies that a rise in the true return to education will increase the degree of convexity of the relationship between eamings and years of education for a fixed cohort of individuals. Permanent differences in the levels of the eamings-schooling relationship across cohorts will arise if the mapping between schooling and ability differs across cohorts. These implications of the two-factor model allow the identification of changes in the causal effect of education over time and across cohorts.

Suggested Citation

  • Olivier Deschenes, 2001. "Unobserved Ability, Comparative Advantage, and the Rising Return to Education in the United States: A Cohort-Based Approach," Working Papers 835, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:456
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    File URL: http://dataspace.princeton.edu/jspui/handle/88435/dsp018p58pc95h
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    Cited by:

    1. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2000. "The returns to education : a review of evidence, issues and deficiencies in the literature," Open Access publications 10197/670, School of Economics, University College Dublin.
    2. repec:ucn:wpaper:10197/1099 is not listed on IDEAS
    3. Thomas Lemieux, 2006. "Postsecondary Education and Increasing Wage Inequality," American Economic Review, American Economic Association, vol. 96(2), pages 195-199, May.

    More about this item

    Keywords

    earnings; education;

    JEL classification:

    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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