NATURE AND NURTURE: ABILITY AND EDUCATION IN THE POLICY EVALUATION APPROACH By

The present paper follows the rationality of the Human Capital theory to explain the heterogeneity of returns to schooling in a policy evaluation model. The empirical implications of the model are extended further from the properties of ordinary least squares and instrumental variable estimators and centered on predictions about the sign of different policy evaluation parameters and on the shape and variability of marginal returns to education. Empirical evidence shown by a binary choice model supports the assumptions that abler people face lower marginal costs of schooling and higher variability of returns. Evidence obtained from a sequential choice model also supports the former assumption