Returns to Education through Access to Higher-Paying Firms: Evidence from US Matched Employer-Employee Data

Niklas Engbom; Christian Moser

doi:10.1257/aer.p20171013

Returns to Education through Access to Higher-Paying Firms: Evidence from US Matched Employer-Employee Data

Niklas Engbom¹; Christian Moser²

¹ Department of Economics, Princeton University, Julis Romo Rabinowitz Building, Princeton, NJ 08544 (e-mail: ) · ² Graduate School of Business, Columbia University, 3022 Broadway, New York, NY 10027 (e-mail: )

American Economic Review 2017

We use administrative US matched employer-employee data merged with detailed information on individuals' academic records to assess the extent to which returns to education are mediated by the sorting of workers across firms. We present three results. First, we confirm findings in the earlier literature of large pay differences across higher education degrees. Second, we show that up to one quarter of pay premiums for higher degrees are explained by between-firm pay differences. Third, higher degrees are associated with greater representation at the best-paying firms. We conclude that employer heterogeneity is an important factor in mediating the returns to education.

DOI: 10.1257/aer.p20171013
Volume: 107 (5)
Pages: 374-378
Language: en
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