The Role of Mathematical and Verbal Skills on the Returns to Graduateand Professional Education

Students in majors with higher average quantitative GRE scores are less likely to attend graduate school whilestudents in majors with higher average verbal GRE scores are more likely to attend graduate school. This sortingeffect means that students whose cognitive skills are associated with lower earnings at the bachelor’s level are themost likely to attend graduate school. As a result, there is a substantial downward bias in estimated returns tograduate education. Correcting for the sorting effect raises estimated annualized returns to a Master’s or doctoraldegree from about 5% to 7.3% and 12.8% respectively. Estimated returns to professional degrees rise from 13.9%to 16.6%. These findings correspond to a large increase in relative earnings received by postgraduate degree holdersin the United States over the past 20 years.[...]