Socioeconomic Background, Schooling, Experience and Monetary Rewards in the United States

Using the Panel Study of Income Dynamics, we test the proposition that interaction between education and socioeconomic status (SES) has a negative impact on earnings. Contrary to findings by Papanicolaou and Psacharopoulos for the United Kingdom, no evidence for such a negative effect is found for the United States. Further, adding IQ to our equation results in a negligible impact on the education coefficient. In addition, we find a positive interaction between SES and experience. Alternative explanations for the differences between the UK and US results are discussed.