Quality-Consistent Estimates of International Schooling and Skill Gradients

Mincer wage equations focus on the earnings premium associated with additional schooling for a cross section of individuals of different ages but generally fail to account for changes in education quality over time. More fundamentally, school attainment is an inadequate proxy of individual skills, when both family inputs and ability affect cognitive skills. We combine quality-adjusted measures of schooling and international literacy test information to estimate skill gradients for 13 countries. The premiums to quality-adjusted education are considerably higher than the traditional Mincer estimate for most countries, but this bias is more than offset by consideration of other factors affecting skills and earnings.