THE EFFECT OF EARLY COGNITIVE ABILITY ON EARNINGS
OVER THE LIFE-CYCLE
Torberg Falch og Sofia Sandgren
This paper utilizes information on cognitive ability at age ten and
earnings information from age 20 to 65 to estimate the return to ability
over the life-cycle. Ability measured at an early age is not influenced
by the individual’s choices of schooling and other circumstances.
We find that most of the unconditional return to early cognitive ability
goes through educational choice. The conditional return is increasing
for low levels of experience and non-increasing for experience above about
15-25 years. The return is similar for men and women, and highest for
individuals with academic education. Only a small part of the return can
be explained by higher probability to have a supervisory position.