Gregory F. Veramendi

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The Role of Sorting and Skill Prices in the Evolution of the College Premium
joint with Eleanor Dillon.

Abstract
The gap in wages between workers with and without a college degree has widened substantially since 1980. This change in observed wage patterns could have multiple explanations, including changes in the individual returns to college training, changes in the composition of workers at each schooling level, and changes in the returns to pre-schooling skill endowments. We estimate a robust dynamic model of educational choices and wages that incorporates all three possibilities. The methodology accounts for measurement error in latent abilities, imperfect proxies, and reverse causality. We find that most of the growth in the observed college premium from the late 1980s to 2015 can be attributed to changes in the causal effect of college. Changes in the composition of workers at each schooling level have offset some of the growth in the college premium.




Last modified 12/2018