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

27 Pages Posted: 1 May 2007 Last revised: 14 Oct 2007

See all articles by Cyril D. Pasche

Cyril D. Pasche

University of Geneva - Department of Economics

Date Written: October 2, 2007

Abstract

This paper shows that when specifically controlling for schooling cognitive skills (e.g. the capacity to process information and apply knowledge) and not cognitive skills as a whole, close to 70% of the return to schooling is cognitive. This contrasts with the previous literature that strongly favored the noncognitive hypothesis (e.g. behavioral and personality traits). If one believes such results schools are a place where one acquires or is sorted primarily on a knowledge criterion and not so much on a behavioral one. Findings also suggest that cognitive skills acquired in school are significantly more likely to be rewarded than their non-schooling counterpart. This effect may be attributed to the signaling value of schooling.

Keywords: Schooling, Cognitive and noncognitive skills, Wages, Rate of return, Omitted variable bias, Signaling

JEL Classification: I21, J24, J31

Suggested Citation

Pasche, Cyril D., What is it About Schooling that the Labor Market Rewards? The Components of the Return to Schooling (October 2, 2007). Available at SSRN: https://ssrn.com/abstract=983542 or http://dx.doi.org/10.2139/ssrn.983542

Cyril D. Pasche (Contact Author)

University of Geneva - Department of Economics ( email )

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