Nov 1, 2014
ERN: Other Macroeconomics: Monetary & Fiscal Policies (Topic)
This paper considers several possible channels behind the welldocumented effect of education on earnings. The first channel is that education makes workers more productive on a given task, as in a conventional human capital framework. The second channel is based on the idea that education helps workers get assigned to higherpaying occupations where output is more sensitive to skill. A third and final channel is that workers are more productive and earn more when they are matched to a job related to their field of study. Using data from the 2005 National Graduate Survey and the 2006 Canadian Census, I find that channels two and three account for close to half of the conventionally measured return to education. The results indicate that the return to education varies greatly depending on occupation, field of study and the match between these two factors.