Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2003:13: The effect of schooling and ability on achievement test scores

Karsten T Hansen (), James J Heckman and Kathleen J Mullen ()
Additional contact information
Karsten T Hansen: Kellogg School of Management, Northwestern University, Postal: Evanston, IL 60657, USA
James J Heckman: Department of Economics, The University of Chicago, Postal: 1126 East 59th Street, Chicago, IL 60637, USA
Kathleen J Mullen: Department of Economics, The University of Chicago, Postal: 1126 East 59th Street, Chicago, IL 60637, USA

Abstract: This paper develops two methods for estimating the effect of schooling on achievement test scores that control for endogeneity of schooling by postulating that both schooling and test scores are generated by a common unobserved latent ability. These methods are applied to data on schooling and test scores. Estimates from the two methods are in close agreement. We find that the effects of schooling on test scores are roughly linear across schooling levels. The effects of schooling on measured test scores are slightly larger for lower latent ability levels. We find that schooling increases the AFQT score on average between 2 and 4 percentage points, roughly twice as large as the effect claimed by Herrnstein and Murray (1994) but in agreement with estimates produced by Neal and Johnson (1996) and Winship and Korenman (1997). We extend the previous literature by estimating the impact of schooling on measured test scores at various quantiles of the latent ability distribution.

Keywords: Education; ability; latent variables; selection; MCMC

JEL-codes: C15; C35; I21

71 pages, May 15, 2003

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