The Effect of Schooling and Ability on Achievement Test Scores. NBER Working Paper Series.

This study developed two methods for estimating the effect of schooling on achievement test scores that control for the endogeneity of schooling by postulating that both schooling and test scores are generated by a common unobserved latent ability. The methods were applied to data on schooling and test scores. Estimates from the two methods are in close agreement. It is found that the effects of schooling on test scores are roughly linear across schooling levels. The effects of schooling on measured test scores are slightly larger for lower latent ability levels. It is also found that schooling increases the Armed Forces Qualification Test (AFQT) score on average between 2 and 4 percentage points, roughly twice as large as the effect claimed by R. Herrnstein and C. Murray (1994), but in agreement with estimates produced by D. Neal and W. Johnson (1996) and C. Winship and S. Korenman (1997). The study extends the previous literature by estimating the impact of schooling on measured test scores at various quantiles of the latent ability distribution. Four appendixes describe the data and discuss estimation procedures. (Contains 14 figures, 16 tables, and 36 references.) (Author/SLD)