Scandinavian Working Papers in Economics

Working Paper Series, Center for Labor Studies,
Uppsala University, Department of Economics

No 2010:2: The effect of early cognitive ability on earnings over the life-cycle

Torberg Falch () and Sofia Sandgren Massih ()
Additional contact information
Torberg Falch: Department of Economics, Norwegian University of Science and Technology, Postal: N-7491 Trondheim, Norway
Sofia Sandgren Massih: Uppsala Center for Labor Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper utilizes information on cognitive ability at age ten and earnings information from age 20 to 65 to estimate the return to ability over the life-cycle. Cognitive ability measured at an early age is not influenced by the individual’s choices of schooling. We find that most of the unconditional return to early cognitive ability goes through educational choice. The conditional return is increasing for low levels of experience and non-increasing for experience above about 15-25 years. The return is similar for men and women, and highest for individuals with academic education. Only a small part of the return can be explained by higher probability to have a supervisory position.

Keywords: Cognitive ability; life-cycle; earnings; IQ; employer learning *

JEL-codes: I29; J31

40 pages, January 19, 2010

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