The Differential Returns to Cognitive Ability in the Labor and Capital Market
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SeriesResearch on Monday
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Speaker(s)Daniel Waldenström (Research Institute of Industrial Economics, Sweden)
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FieldMacroeconomics
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LocationErasmus University Rotterdam, Campus Woudestein, Polak 2-22
Rotterdam -
Date and time
December 05, 2022
14:30 - 15:30
Abstract
We study the returns to cognitive ability in the labor and capital market. Using population-wide Swedish military enlistment data and administrative tax records, we find that ability matters significantly more for capital income than for labor earnings and that this result persists after controlling for savings, bequests, educational attainment, occupational choice, and the parental economic position. The pattern is similar for men and women, surprisingly robust over time, and larger pre-tax than post-tax. In addition, cognitive ability is significantly positively correlated with wealth returns.