On Wed, 25 Oct 2000, Bryan Caplan wrote:
> > 2- What % of wages is due to i.q. and what are the other factors?
>
> That one is pretty easily answered using NLSY data. Here's one fairly
> canonical rate of return to education regression:
> In answer to your question, then, each IQ percentile on average raises
> your annual labor earnings by .5%; each year of school raises them by
> 10.3%.
These are correlations and causation is anything but obvious, so the
phrasing "each year of school raises wages by 10.3%" is misleading.
There are very well-known endogeneity problems here, in addition to
the observation that the human capital variables held constant are
themselves affected by cognitive ability, such that the partial
derivative estimated likely underestimates the total return to such
ability dramatically.
The question above has been and continues to be the subject of much
research; it is not a "fairly easy" problem at all.
Chris Auld (403)220-4098
Economics, University of Calgary <mailto:[EMAIL PROTECTED]>
Calgary, Alberta, Canada <URL:http://jerry.ss.ucalgary.ca/>
