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Returns to Graduate and Professional Education: The Roles of Mathematical and Verbal Skills by Major

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  • Song, Moohoun
  • Orazem, Peter
Abstract
Students in majors with higher average quantitative GRE scores are less likely to attend graduate school while students in majors with higher average verbal GRE scores are more likely to attend graduate school. This sorting effect means that students whose cognitive skills are associated with lower earnings at the bachelor’s level are the most likely to attend graduate school. As a result, there is a substantial downward bias in estimated returns to graduate education. Correcting for the sorting effect raises estimated annualized returns to a Master’s or doctoral degree from about 5% to 14.5% and 12.6% respectively. Estimated returns to professional degrees rise from 14% to 20%. These findings correspond to a large increase in relative earnings received by post graduate degree holders in the United States over the past 20 years.

Suggested Citation

  • Song, Moohoun & Orazem, Peter, 2005. "Returns to Graduate and Professional Education: The Roles of Mathematical and Verbal Skills by Major," Staff General Research Papers Archive 12432, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:12432
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    File URL: http://www2.econ.iastate.edu/papers/p3838-2005-10-12.pdf
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    More about this item

    Keywords

    sorting; Phd degree; Master's degree; Professional degree; GRE; Returns; Graduate Education; verbal ability; mathematics ability;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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