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The Changing Roles of Education and Ability in Wage Determination

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  • Gonzalo Castex

    () (Central Bank of Chile)

  • Evgenia Dechter

    () (University of New South Wales)

Abstract

This study examines changes in returns to formal education and cognitive skills over the last 20 years using the 1979 and 1997 waves of the National Longitudinal Survey of Youth. We show that cognitive skills had a 30%-50% larger effect on wages in the 1980s than in the 2000s. Returns to education were higher in the 2000s. These developments are not explained by changing distributions of workers’ observable characteristics or by changing labor market structure. We show that the decline in returns to ability can be attributed to differences in the growth rate of technology between the 1980s and 2000s.

Suggested Citation

  • Gonzalo Castex & Evgenia Dechter, 2012. "The Changing Roles of Education and Ability in Wage Determination," Discussion Papers 2012-43, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2012-43
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2012-43.pdf
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    References listed on IDEAS

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    1. repec:bla:ecinqu:v:55:y:2017:i:1:p:187-201 is not listed on IDEAS
    2. Paul Beaudry & David A. Green & Benjamin M. Sand, 2016. "The Great Reversal in the Demand for Skill and Cognitive Tasks," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 199-247.
    3. Youngmin Park & Youngki Shin & Lance Lochner, 2017. "Earnings Dynamics and Returns to Skills," 2017 Meeting Papers 166, Society for Economic Dynamics.
    4. Brad J. Hershbein & Lisa B. Kahn, 2016. "Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings," Upjohn Working Papers and Journal Articles 16-254, W.E. Upjohn Institute for Employment Research.
    5. Lance Lochner & Youngmin Park & Youngki Shin, 2017. "Wage Dynamics and Returns to Unobserved Skill," Staff Working Papers 17-61, Bank of Canada.
    6. D’Haultfœuille, Xavier & Maurel, Arnaud & Zhang, Yichong, 2018. "Extremal quantile regressions for selection models and the black–white wage gap," Journal of Econometrics, Elsevier, vol. 203(1), pages 129-142.
    7. Jared Ashworth & V. Joseph Hotz & Arnaud Maurel & Tyler Ransom, 2017. "Changes across Cohorts in Wage Returns to Schooling and Early Work Experiences," NBER Working Papers 24160, National Bureau of Economic Research, Inc.
    8. Fonseca, Tiago & Lima, Francisco & Pereira, Sonia C., 2018. "Understanding productivity dynamics: A task taxonomy approach," Research Policy, Elsevier, vol. 47(1), pages 289-304.
    9. Joshua Goodman, 2017. "The Labor of Division: Returns to Compulsory High School Math Coursework," Working Paper 95966, Harvard University OpenScholar.
    10. Richey, Jeremiah & Rosburg, Alicia, 2014. "Human capital and trends in the transmission of economic status across generations in the U.S," MPRA Paper 60113, University Library of Munich, Germany.
    11. David J. Deming, 2015. "The Growing Importance of Social Skills in the Labor Market," NBER Working Papers 21473, National Bureau of Economic Research, Inc.
    12. Robert Plant & Manuel S. Santos & Tarek Sayed, 2017. "Computerization, Composition of Employment, and Structure of Wages," Working Papers 2017-09, University of Miami, Department of Economics.

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