Skills, schooling, and household income in Ghana

This article examines the impact of cognitive skills on the income of households in Ghana. It uses scores on mathematics and English tests to measure cognitive skills and estimates the returns to these skills based on farm profit, off-farm income, and total income. The article uses Powell's censored least absolute deviations and symmetrically trimmed least squares estimators to estimate farm and off-farm income. In contrast to Heckman's two-step or the Tobit estimator, Powell's estimators are consistent in the presence of heteroscedasticity and ave robust to other violations of normality. The results show that cognitive skills have a positive effect on total and off-farm income but do not have a statistically significant effect on farm income.