Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296953 
Year of Publication: 
2023
Series/Report no.: 
Working Paper No. 2023:8
Publisher: 
Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala
Abstract: 
We investigate the returns to cognitive ability in the labor and capital markets. Using population-wide Swedish military enlistment data and administrative tax records, we find that cognitive ability is much better at predicting capital income than labor earnings. The difference is almost a factor of three and remains substantial even after controlling for education, occupation, savings, inheritance, and parental background. Moreover, ability is significantly positively correlated with wealth returns. Our results provide new insights into why inequality in capital income is greater than in labor income and shed light on the drivers of economic mobility.
Subjects: 
Ability
Skills
Education
Capital income
Wealth
JEL: 
J24
D31
H20
Document Type: 
Working Paper

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