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Steeper at the Top: Cognitive Ability and Earnings in Finland and Norway [pdf]

2 points by nabla9 3y ago

nabla9 3y ago
>Abstract We document a convex relationship between earnings rank and cognitive ability for men in Finland and Norway using administrative data on over 350,000 men in each country: the top earnings percentile score on average 1 standard deviation higher than median earners, while median earners score about 0.5 standard deviation higher than the bottom percentile of earners. Top earners also have substantially less variation in cognitive test scores. While some high-scoring men are observed with very low earnings, the low- est cognitive scores are almost absent among the top earners. Overall, the joint distribution of earnings rank and ability is very similar in Finland and Norway. We find that the slope of the ability curve across earnings ranks is steepest in the upper tail, as is the slope of the earnings curve across cognitive ability. The steep slope of the ability curve across the top earnings percentiles differs markedly from the flat or declining slope recently reported for Sweden .. important to remember that while the average relation is very strong, individuals scatter around. >Finally, it is important to note that, while the average relation between cognitive ability and earnings in the population is very strong, most variation in earnings does not relate to cognitive ability. Individual ability cannot be reliably inferred just from observed earnings or vice versa. For example, even among the top 1% of the earnings distribution, where the variation in cognitive ability is at its lowest, 9% 15 of men in Finland and 14% in Norway scored below the population median in the cognitive test. Conversely, among the bottom percentile of the earnings distribution, about a 30% of men scored above the median in both countries.
- al_borland 3y ago
  > For example, even among the top 1% of the earnings distribution, where the variation in cognitive ability is at its lowest, 9% 15 of men in Finland and 14% in Norway scored below the population median in the cognitive test. This sounds like the old, “A students work for C students,” scenario. It would make sense that the top 1% are business owners, not wage earners.
  - nabla9 3y ago
    There is some old money in the top earning ranks. Especially in Sweden. But 1 standard deviation on average is huge cognitive ability difference. High income -> high ability correlation is strong.
java-man 3y ago
FF refuses to download - says File not downloaded: Potential security risk. What gives?
- java-man 3y ago
  ah, HTTP-only download.

2 points by nabla9 3y ago

>Abstract We document a convex relationship between earnings rank and cognitive ability for men in Finland and Norway using administrative data on over 350,000 men in each country: the top earnings percentile score on average 1 standard deviation higher than median earners, while median earners score about 0.5 standard deviation higher than the bottom percentile of earners. Top earners also have substantially less variation in cognitive test scores. While some high-scoring men are observed with very low earnings, the low- est cognitive scores are almost absent among the top earners. Overall, the joint distribution of earnings rank and ability is very similar in Finland and Norway. We find that the slope of the ability curve across earnings ranks is steepest in the upper tail, as is the slope of the earnings curve across cognitive ability. The steep slope of the ability curve across the top earnings percentiles differs markedly from the flat or declining slope recently reported for Sweden .. important to remember that while the average relation is very strong, individuals scatter around. >Finally, it is important to note that, while the average relation between cognitive ability and earnings in the population is very strong, most variation in earnings does not relate to cognitive ability. Individual ability cannot be reliably inferred just from observed earnings or vice versa. For example, even among the top 1% of the earnings distribution, where the variation in cognitive ability is at its lowest, 9% 15 of men in Finland and 14% in Norway scored below the population median in the cognitive test. Conversely, among the bottom percentile of the earnings distribution, about a 30% of men scored above the median in both countries.

al_borland 3y ago
> For example, even among the top 1% of the earnings distribution, where the variation in cognitive ability is at its lowest, 9% 15 of men in Finland and 14% in Norway scored below the population median in the cognitive test. This sounds like the old, “A students work for C students,” scenario. It would make sense that the top 1% are business owners, not wage earners.
- nabla9 3y ago
  There is some old money in the top earning ranks. Especially in Sweden. But 1 standard deviation on average is huge cognitive ability difference. High income -> high ability correlation is strong.

java-man 3y ago

FF refuses to download - says File not downloaded: Potential security risk. What gives?

java-man 3y ago
ah, HTTP-only download.