Income, education, and ability: the utility of alternative measures of ability.
Knowles, Edwin James Jr.
Thomas, George W.
Mehay, Stephen L.
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This thesis analyzes the effect of innate ability on earnings differentials by using a standard human capital earnings function. The data used is the 1984 panel (Round 6) of the National Longitudinal Survey for Youth aged 14 to 21 in 1979. AFQT and Coding Speed (the Armed Services Vocational Aptitude Battery (ASVAB) Form 8A subtest) were examined and compared for the utility of each as a valid ability measure. The primary finding is that, although Coding Speed demonstrated utility as an ability proxy, AFQT functioned much more effectively. While the effect of innate ability by itself on earnings was found to be relatively small, the inclusion of measures of ability in human capital earnings equations substantially reduced the estimates of the returns from education.
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