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To take a common and extreme but useful example: the most important parts of the Apple supply chain are Steve Jobs' brain and the community of engineers tasked with turning Jobs' musings into actual, revolutionary products.This has significant implications for the return to skills and the structure of economies.

In Table 3, as in Table 2, estimates of return to skills (β 1) are not directly comparable, because of scale dependence.

Wage dispersion for homogeneous workers is one of the numerous issues (others being, for example, the return to skills or the unemployment duration) studied by an impressive amount of empirical research that operationalises the theories mentioned above.

However, the sharp assumptions about the return to skills dropping all the way to zero above max j and the cost of skill deployment being exactly zero up to one's endowment can be relaxed.

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For ease of exposition, we frequently refer to (beta_{1}) simply as the "return to skill".

For example, the return to skill in the labor market, or in admission to universities, may be crucial in terms of determining parents' and students' attitudes toward skill accumulation.

The evidence on the returns to skills from the natural experiments in the United States and Germany corroborates the findings from the international analysis; estimated returns to skills in the IV models are again considerably larger than the least squares estimates.

We describe potential endogeneity problems in the returns to skills estimation and approaches to tackle these issues in "Empirical strategy".

In both cases, the second-stage estimate on the returns to skills increases substantially compared to the OLS estimate.

Estimated returns to skills in the different IV models are consistently larger than estimates derived from least squares models.

To test this additional hypothesis, we create a measure of racial discrimination based on returns to skills, estimate returns to education for blacks and whites, and compute the ratio of average returns for blacks to average returns for whites.

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