The efficacy of ability proxies for estimating the returns to schooling: A factor model‐based evaluation

Mohitosh Kejriwal, Xiaoxiao Li, Linh Nguyen () and Evan Totty

Journal of Applied Econometrics, 2024, vol. 39, issue 1, 3-21

Abstract: A common approach to addressing ability bias is to augment the earnings‐schooling regression with proxies for cognitive and non‐cognitive skills. We evaluate this approach using a factor model framework, which allows consistent estimation of the returns to schooling without relying on proxies. The factor model estimators may be viewed as implicitly estimating proxy measurement error and/or accounting for omitted dimensions of ability. A bias decomposition quantifies the contribution of the proxies while the estimated latent skills are used to construct direct tests for their viability. Both sets of results confirm the inadequacy of the proxies in capturing the latent skills.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/jae.3011

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:39:y:2024:i:1:p:3-21

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().