Schooling, Ability, and Earnings: Cross-Sectional Findings 8 to 14 Years after High School Graduation

Abstract

This paper extends and modifies the Sewell and Hauser (1975) analysis of annual earnings cross-sections of male Wisconsin high school graduates through the 14th year following high school graduation. In the first part of the analysis, we estimate a simple recursive model of earnings attainment (including social background, mental ability, and post-secondary educational attainment) for annual earnings cross-sections for the years 1965 to 1971 (8 to 14 years after high school). We find that the degree and manner in which the variables in our model influence earnings vary across annual cross-sections. In the second part of the analysis, we shift earnings profiles to allow for the assessment of the returns to schooling net of work experience. The results of the controlled analysis suggest that (1) the economic returns to post-secondary schooling are approximately 10 percent per year if a bachelor's degree is obtained and approximately 6 percent per year if a bachelor's degree is not obtained, and (2) the economic returns to post-secondary schooling are quite constant across experience levels. Bias in the estimation of economic returns to schooling and interactions between the effects of ability and other variables on earnings are also examined.