Title

Unobserved Ability, Comparative Advantage, and the Rising Return to Education in the United States: A Cohort-Based Approach

Author(s)

Olivier Deschenes Olivier Deschenes (Princeton University)

Abstract

This paper quantities the extent to which the rise in the measured return to education between I979 and 2000 is reflecting a change in the causal effect of education on labor market eamings. The conceptual issues are formalized in a two-factor model of ability. schooling and eamings that allows heterogeneity in absolute and comparative advantage across the population. ln particular, the framework implies that a rise in the true return to education will increase the degree of convexity of the relationship between eamings and years of education for a fixed cohort of individuals. Permanent differences in the levels of the eamings-schooling relationship across cohorts will arise if the mapping between schooling and ability differs across cohorts. These implications of the two-factor model allow the identification of changes in the causal effect of education over time and across cohorts.

Creation Date

2001-08

Section URL ID

IRS

Paper Number

456

URL

https://dataspace.princeton.edu/bitstream/88435/dsp018p58pc95h/1/456.pdf

File Function

Jel

P20

Keyword(s)

earnings; education

Suppress

false

Series

1