The Effect of Higher Education on Careers of Workers

This paper documents the effects of the productivity revealing function of higher education, which is recently documented by Arcidiacono, Bayer and Hizmo (2010), on the subsequent careers of workers. Unlike the accumulation and signaling of human capital, the productivity revealing function of higher education yields simple and unambiguous predictions on the post-schooling productivity revealing activities of high school and college graduates. Given the functions of higher education, I build a model that predicts active productivity revealing activity for high school graduate workers and inactive productivity revealing activity for college graduates. In particular, the productivity revealing activity will be positively related with ability for high school workers. However, among college graduates, the activity that can be served as ‘productivity revealing’ will not be positively related to ability. I test these predictions using NLSY79 public data by regressing productivity revealing activity and job mobility on AFQT scores separately for high school and college graduates. Overall, the results coincide with the predictions of the model quite well, implying the importance of the function of higher education on understanding the different careers of high school and college graduates. ∗Ph.D. Candidate, Department of Economics, Columbia University; 420 West 118th Street, New York, NY 10027; Contact at [email protected] I am very grateful for support, guidance, and many helpful comments from Miguel Urquiola. I thank Bentley MacLeod, Cristian Pop-Eleches, Eric Verhoogen and Till von Wachter for the suggestions and the participants of the Columbia University Applied Microeconomics Colloquium for their comments. All errors are my own