Income, Education, and Ability: The Utility of Alternative Measures of Ability
NAVAL POSTGRADUATE SCHOOL MONTEREY CA
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This thesis analyzes the effect of innate ability on earnings differentials by using a standard human capital earnings function. The data used is the 1984 panel Round 6 of the Nation Longitudinal Survey for Youth aged 14 to 21 in 1979. AFQT and Coding Speed the Armed Services Vocational Aptitude Battery ASVAB Form 8A subtest were examined and compared for the utility of each as a valid ability measure. The primary finding is that, although Coding Speed demonstrated utility as an ability proxy, AFQT functioned much more effectively. While the effect of innate ability by itself on earnings was found to be relatively small, the inclusion of measures of ability in human capital earnings equations substantially reduced the estimates of the returns from education. Keywords Income, Ability Human Capital Innate Ability.
- Economics and Cost Analysis
- Humanities and History
- Numerical Mathematics