This paper compares the characteristics of 63 alleged homegrown Islamic terrorists in the U.S.A. to a representative sample of 1,000+ Muslim Americans. The alleged terrorists have about average level of education. Those with higher education were judged closer to succeeding.
Using method of moments techniques (ref: Chamberlain (1984), Gallant and Jorgenson (1979)),
this paper’s objective is to test the predictions of the theory of job-matching and the theory of
human capital pertaining to the covariance structure of residuals from a typical Mincer log
earnings equation. The selection process implicit to job matching is such that we should observe
a decrease in the contribution of the variance of the job-match component when we follow the
workers as they acquire tenure in their job. Results are generally in agreement with these
predicted patterns, especially in the case of more educated workers. On the other hand, if jobs
are considered as pure experience goods, the predicted increase in the variance at the start of the
employment relationship is not supported by the data, except perhaps for less educated workers.
Turning next to human capital theory, the predicted tradeoff between the job-speciﬁc intercept
and slope parameters is strongly supported by the data, especially in the case of workers having
at least a High School diploma.
During the 1980s wage differentials between younger and older
workers and between more and less educated workers expanded
rapidly. Wage dispersion among individuals with the same age
and education also rose. A simple explanation for both sets of
facts is that earnings represent a return to a one-dimensional
index of skill, and that the rate of return to skill rose over
We explore a simple method for estimating and testing ‘single
index’ models of wages. Our approach integrates 3 dimensions
of skill: age, education, and unobserved ability. We find that
a one-dimensional skill model gives a relatively successful
account of changes in the structure of wages for white men and
women between 1979 and 1989. We then use the estimated models
for whites to analyze recent changes in the relative wages of
black men and women.
In a recent, and widely cited, paper, Ashenfelter and Krueger (1994) use a new sample of identical
twins to investigate the contribution of genetic ability to the observed cross-sectional return to schooling.
This paper re-examines Ashenfelter and Krueger’s estimates using three additional years of the same twins
survey. I find that the return to schooling among identical twins is about 10 percent per year of schooling
completed. Most importantly, unlike the results reported in Ashenfelter and Krueger, I find that the within-
twin regression estimate of the effect of schooling on the log wage is smaller than the cross-sectional
estimate, implying a small upward bias in the cross-sectional estimate. Ashenfelter and Krueger’s
measurement error corrected estimates are insignificantly different from those presented here, however.
Finally, there is evidence of an important individual-speciﬁc component to the measurement error in
There are many estimates of the effect of college quality on students’ subsequent earnings. One
difﬁculty interpreting past estimates, however, is that elite colleges admit students, in part, based on
characteristics that are related to their earnings capacity. Since some of these characteristics are
unobserved by researchers who later estimate wage equations, it is difficult to parse out the effect of
attending a selective college from the students‘ pre-college characteristics. This paper uses
information on the set of colleges at which students were accepted and rejected to remove the effect
of unobserved characteristics that inﬂuence college admission. Speciﬁcally, we match students in
the newly collected College and Beyond (C&B) Data Set who were admitted to and rejected from a
similar set of institutions, and estimate ﬁxed effects models. As another approach to adjust for
selection bias, we control for the average SAT score of the schools to which students applied using
both the C&B and National Longitudinal Survey of the High School Class of 1972. We ﬁnd that
students who attended more selective colleges do not earn more than other students who were
accepted and rejected by comparable schools but attended less selective colleges. However, the
average tuition charged by the school is signiﬁcantly related to the students’ subsequent earnings.
Indeed, we ﬁnd a substantial internal rate of return from attending a more costly college. Lastly,
the payoff to attending an elite college appears to be greater for students from more disadvantaged
This paper presents evidence on the quality of schooling by race and ethnic
origin in the United States. Although substantial racial segregation
across schools exists, the average pupil-teacher ratio is approximately the
same for black and white students. Hispanic students, however, on average have
l0 percent more students per teacher. Relative to whites, blacks
and Hispanics are less likely to use computers at school and at work. The
implications of these differences in school quality for labor market
outcomes are examined. We conclude by examining reasons for the increase
in the black-white earnings gap since the mid-1970s.
The ﬁrm-speciﬁc human capital theory implies that large ﬁrms prefer to hire younger workers
because they invest more in workers than small ﬁrms do and because those investments are ﬁxed
costs. In this paper, I use data from the Beneﬁts Supplement to the Current Population Survey
(CPS) to demonstrate that large ﬁrms indeed hire younger workers than small ﬁrms, especially for
white-collar occupations. I present a simple model of ﬁrm cost minimization within an employee
search framework, which is consistent with large ﬁrms’ propensity to hire younger workers, and has
additional testable implications regarding large ﬁrms’ compensation structures. First, since young
workers are more valuable to large ﬁrms than to small ﬁrms, large ﬁrms oﬁer higher starting wages
to attract them. This implies ﬂatter starting wage—age proﬁles among the new hires in large ﬁrms.
Second, since large ﬁrms invest more in workers, they continue to pay higher wages to retain the
trained employees. This implies steeper wage-tenure proﬁles in large ﬁrms. Both predictions are
borne out by the CPS data. Most strikingly, for the newly hired white-collar workers, not only are
the starting wage-age proﬁles ﬂatter in large ﬁnns, but also the size-wage premium disappears for
workers hired at age 35 or older.
Furthermore, by exploiting cost variations in dimensions other than ﬁrm size, such as occupation
and industry, this model has additional testable implications. More speciﬁcally, an extension of
the simple model would imply that, for high training occupations, workers displaced at older ages
suffer greater wage losses than younger workers because they have a harder time ﬁnding a new good
job that requires high investments. But there should be no systematic difference in wage loss by
age for occupations that require little training. This prediction is supported by the data from the
Displaced Worker Surveys. Finally, limited evidence from the BLS Survey of Employer Provided
Training 1995 and the CPS suggests that industries that train more also appear to hire younger