The Economic Return to Education Revisited: The Role of Cognitive Skills and Socioemotional Traits in Wage Inequality

Dohoon Lee, Princeton University

While the economic return to education remains a parsimonious explanation for rising wage inequality and its current high level, this account tends to be limited to the demand for cognitive skills and between-education group wage inequality. Using data from the National Longitudinal Survey of Youth, 1979, this paper examines the role of socioemotional traits as well as cognitive skills in between- and within-education group wage inequality. Quantile regression analysis shows that differences in cognitive skills and socioemotional traits account significantly for the college wage premium and wage dispersion within college graduates. Socioemotional traits play a more pronounced role in wage inequality among college graduates, and the wage effect of these skills and traits strengthens as workers reach their prime ages in the labor market. I discuss implications of these findings with emphasis on the role of the family in wage inequality.