Researchers often identify degree effects by including degree attainment (D) and years of schooling (S) in a wage model, yet the source of independent variation in these measures is not well understood. We argue that S is negatively correlated with ability among degree-holders because the most able graduate the fastest, but positively correlated among dropouts because the most able benefit from increased schooling. Using NLSY79 data, we find support for this argument; our findings also suggest that highest grade completed is the preferred measure of S for dropouts, while age at school exit is a more informative measure for degree-holders.
ASJC Scopus subject areas
- Economics and Econometrics
- Strategy and Management
- Organizational Behavior and Human Resource Management
- Management of Technology and Innovation