Ability and rates of return to schooling-making use of the Swedish enlistment battery test

Using the Swedish military enlistment test, this paper estimates the return to schooling for individuals belonging to different parts of the ability distribution. It also attempts to predict whether an endogenous test score causes bias in the "ability-specific" returns to schooling that varies with the test score. A significant finding is that a higher score in the test is associated with a higher return to schooling, but that the positive association is diminishing in the test score. In general, the bias in the ability-specific returns to schooling does not seem to vary with the test score level.