Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education

43 Pages Posted: 25 Jul 2000

See all articles by John Cawley

John Cawley

Cornell University - College of Human Ecology, Department of Policy Analysis & Management (PAM); Cornell University - College of Arts & Sciences, Department of Economics; The University of Sydney - School of Economics; National University of Ireland, Galway (NUIG) - J.E. Cairnes School of Business & Economics; NBER; IZA

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Edward Vytlacil

Yale University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1998

Abstract

This paper examines the contribution of the rise in the return to ability to the rise in the economic return to education. All of the evidence on this question comes from panel data sets in which a small collection of adjacent birth cohorts is followed over time. The structure of the data creates an identification problem that makes it impossible to identify main age and time effects and to isolate all possible age-time interactions. In addition, many education-ability cells are empty due to the stratification of ability with educational attainment. These empty cells or identification problems are literature and produce a variety of different estimates. We test and reject widely used linearity assumptions invoked to identify the contribution of the return to ability on the return to schooling. Using nonparametric methods find little evidence that the rise in the return to education is centered among the most able.

Suggested Citation

Cawley, John and Heckman, James J. and Vytlacil, Edward J., Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education (January 1998). NBER Working Paper No. w6388. Available at SSRN: https://ssrn.com/abstract=226136

John Cawley (Contact Author)

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James J. Heckman

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Edward J. Vytlacil

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