Can education compensate for low ability? Evidence from British data (version 3.1)
This paper uses cross section data to investigate whether education and ability are substitutes or complements in the determination of earnings. Using a measure of cognitive ability based on tests taken at ages 7 and 11 we find, unlike most of the existing literature, clear evidence that the return to schooling is lower for those with higher ability indicating that education can act as a substitute for observed ability. We also estimate quantile regression functions to examine how the return to schooling varies across the conditional distribution of earnings. The results show that the return is lower for higher quantiles, suggesting that education is also a substitute for unobserved ability. This paper forms part of the Policy Evaluation Program at the Institute for the Study of Social Change (ISSC) at UCD.
|Date of creation:||Jul 2004|
|Date of revision:|
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- Orley Ashenfelter & Cecilia Rouse, 1998.
"Income, Schooling, and Ability: Evidence from a New Sample of Identical Twins,"
The Quarterly Journal of Economics,
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- 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.
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"Omitted-Ability Bias and the Increase in the Return to Schooling,"
NBER Working Papers
3693, National Bureau of Economic Research, Inc.
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- Carneiro, Pedro & Heckman, James J., 2003.
"Human Capital Policy,"
IZA Discussion Papers
821, Institute for the Study of Labor (IZA).
- Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, 04.
- Pereira, Pedro T. & Martins, Pedro S., 2001.
"Is there a Return-Risk Link in Education?,"
IZA Discussion Papers
321, Institute for the Study of Labor (IZA).
- John Cawley & James Heckman & Edward Vytlacil, 1998. "Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education," NBER Working Papers 6388, National Bureau of Economic Research, Inc.
- Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S74-S103, Part II, .
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