College education is known to increase wages and earnings. The college wage premium – how much more one earns with a college degree over the earnings of someone with only a high-school degree – is quite large at 70%-80%, as shown here by Bengali, Sander, Valletta and Zhao (2023).
However, the exact cause of the college wage premium is hotly debated. Two main theories for the college wage premium have been proposed:
Completing college is a ‘signal’ that a person is highly capable;
College improves one’s abilities, making them more productive.
Find out in today’s podcast how we can test these theories and which one is the more likely explanation.
And if you’d like to read more about the topic, follow the link below :
