Do the Cognitive Skills of School Dropouts Matter in the Labor Market?

Does the labor market reward cognitive skill differences among those with the fewest educational attainment-high school dropouts? This paper explores this question using a data set that provides information on the universe of dropouts who last attempted the GED exams in Florida and New York in 1989 and 1990. This sample reduces variation in unmeasured variables such as motivation that are correlated with cognitive skills. We examine the returns to basic cognitive skills as measured by GED test scores. The results indicate substantial earnings returns to cognitive skills for all groups except white male dropouts.