Omitted-Ability Bias and the Increase in the Return to Schooling
McKinley L. Blackburn, David Neumark
NBER Working Paper No. 3693
Over the 1980s there were sharp increases in the return to schooling estimated with conventional wage regressions. We use both a signaling model and a human capital model to explore how the relationship between ability and schooling could have changed over this period in ways Chat would have increased the schooling coefficient in these regressions. Our empirical results reject the hypothesis that an increase in the upward bias of the schooling coefficient, due to a change in the relationship between ability and schooling, underlies the observed increase in the return to education over the 1980s. We also find that the increase in the return to education has occurred largely for workers with relatively high levels of academic ability.
Document Object Identifier (DOI): 10.3386/w3693
Published: Journal of Labor Economics. Volume 11, Issue 3, Page 521, Jan 1993 citation courtesy of