A Measure of the Cognitive Component of the Return to Schooling

What is it about schooling that the labor market rewards? The long time answer has essentially been noncognitive skills (i.e., behavioral and personality traits). Allowing cognitive skills (i.e., the capacity to process information and apply knowledge to working tasks) to be acquired both inside of school and outside of school and permitting their return rates to differ, this paper will demonstrate how previous estimates of the components of the return to schooling may be biased. Assuming employers learn on initially unobserved skills, we will show how the cognitive component might be larger than initially thought