Are Returns to Schooling Concentrated Among the Most Able? A Semiparametric Analysis of the Ability–earnings Relationships



In this paper I explore the relationship between ability and log waves using flexible estimation techniques. I find evidence of nonlinearities in these relationships that vary across levels of schooling, and argue that ability-sorting into higher education creates problems for accurately identifying the return to schooling over the entire ability support. Over an ability support that is “common” to those with and without a college education, I find that the college log wage premium is incerasing for the more able, and this premium grew during the period 1984–1994 for individuals at all points in the ability distribution. The growth of this wage premium over time also appears to have followed a “smoother” linear path for high-ability individuals than individuals of lower ability.