Abstract: In this paper we revisit recent findings that the wage return to cognitive ability has declined for white men across cohorts in the United States. Using data from the NLSY79 and the NLSY97, we first explore the link between the changing distribution of AFQT and its impact on the estimated “skill price” of AFQT by decomposing the estimated parameters into estimated unit treatment effects and their associated weights (Yitzhaki, 1996). We show that the changing distribution of cognitive test scores has had a marked effect on the estimated return to cognitive ability, and that the change in the distribution does not seem to be driven by something unique to the NLSY97 sample. We then present preliminary evidence that at least part of this pattern can be explained by the declining levels of labor force attachment of young white men across the NLSY cohorts, suggesting that much more attention needs to be focused on the extensive margin of labor supply for young workers.
Friday, May 10th. 2019
3:30pm – 5:00pm
Small reception to follow in Room 426. All are invited to attend.