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Post-Secondary Education in Canada: Can Ability Bias Explain the Earnings Gap Between College and University Graduates?

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  • Vincenzo Caponi

    () (Department of Economics Ryerson University, Toronto, Canada and The Rimini Centre for Economics Analysis, Rimini, Italy)

  • Miana Plesca

    (University of Guelph, Canada)

Abstract

Post-Secondary Education in Canada: Can Ability Bias Explain the Earnings Gap Between College and University Graduates? Using the Canadian General Social Survey we compute returns to post-secondary education relative to high-school. Unlike previous research using Canadian data, our dataset allows us to control for ability selection into higher education. We find strong evidence of positive ability selection into all levels of post-secondary education for men and weaker positive selection for women. Since the ability selection is stronger for higher levels of education, particularly for university, the difference in returns between university and college or trades education decreases slightly after accounting for ability bias. However, a puzzling large gap persists, with university-educated men still earning over 20% more than men with college or trades education. Moreover, contrary to previous Canadian literature that reports higher returns for women, we document that the OLS hourly wage returns to university education are the same for men and women. OLS returns are higher for women only if weekly or yearly wages are considered instead, because university-educated women work more hours than the average. Nevertheless, once we account for ability selection into post-secondary education, we generally find higher returns for women than for men for all wage measures as a result of the stronger ability selection for men.

Suggested Citation

  • Vincenzo Caponi & Miana Plesca, 2007. "Post-Secondary Education in Canada: Can Ability Bias Explain the Earnings Gap Between College and University Graduates?," Working Paper series 14_07, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:14_07
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    Cited by:

    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. Strawinski, Pawel, 2008. "External Return to Education in Poland," MPRA Paper 11598, University Library of Munich, Germany.
    3. Luiza Antonie & Miana Plesca & Jennifer Teng, 2016. "Heterogeneity in the Gender Wage Gap in Canada," Working Papers 1603, University of Guelph, Department of Economics and Finance.
    4. NAKABAYASHI, Masaki, 2011. "Acquired Skills and Learned Abilities: Wage Dynamics of Blue-collar Workers in Internal Labor Markets," ISS Discussion Paper Series (series F) f153, Institute of Social Science, The University of Tokyo, revised Apr 2012.
    5. Wen Fan, 2012. "Estimating the Return to College in Britain Using Regression and Propensity Score Matching," LABOUR, CEIS, vol. 26(1), pages 31-45, March.
    6. Sylvain Dessy & Safa Ragued, 2013. "Whither the Progressive Tax?," Cahiers de recherche 1340, CIRPEE.
    7. Strawinski, Pawel, 2008. "Changes in return to higher education in Poland 1998-2005," MPRA Paper 9533, University Library of Munich, Germany.

    More about this item

    Keywords

    returns to university; returns to college; returns to trades; unobserved ability; selection bias;

    JEL classification:

    • 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
    • I2 - Health, Education, and Welfare - - Education
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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