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Double trouble: on the value of twins-based estimation of the return to schooling

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  • Bound, John
  • Solon, Gary

Abstract

Several recent studies use the schooling and wage variation between monozygotic twins to estimate the return to schooling. In this paper, we summarize the results from this literature, and we examine the implications of endogenous determination of which twin goes to school longer and of measuring schooling with (possibly mean-reverting) error. Endogeneity of between-twins schooling variation is strongly suggested by the extensive (mostly non-economic) literature documenting that the between-twins difference in birth weight is correlated with the between-twins differences in both schooling and IQ. We conclude that twins-based estimation is vulnerable to the same sort of inconsistency that afflicts conventional cross-sectional estimation. We argue, however, that, if one starts with the presumption that endogenous schooling induces upward inconsistency in the estimated return to schooling, the new twins-based estimates may complement other approaches to tightening the upper bound on the return to schooling.

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Bibliographic Info

Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 18 (1999)
Issue (Month): 2 (April)
Pages: 169-182

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Handle: RePEc:eee:ecoedu:v:18:y:1999:i:2:p:169-182

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Web page: http://www.elsevier.com/locate/econedurev

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  1. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
  2. Alan Krueger & Orley Ashenfelter, 1992. "Estimates of the Economic Return to Schooling from a New Sample of Twins," NBER Working Papers 4143, National Bureau of Economic Research, Inc.
  3. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
  4. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, And Ability: Evidence From A New Sample Of Identical Twins," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 253-284, February.
  5. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, 2nd ed," NBER Books, National Bureau of Economic Research, Inc, number beck75-1, October.
  6. Rouse, Cecilia Elena, 1999. "Further estimates of the economic return to schooling from a new sample of twins," Economics of Education Review, Elsevier, vol. 18(2), pages 149-157, April.
  7. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  8. Neumark, David, 1999. "Biases in twin estimates of the return to schooling," Economics of Education Review, Elsevier, vol. 18(2), pages 143-148, April.
  9. John Bound & Alan B. Krueger, 1989. "The Extent of Measurement Error In Longitudinal Earnings Data: Do Two Wrongs Make A Right?," NBER Working Papers 2885, National Bureau of Economic Research, Inc.
  10. John Bound & David A. Jaeger, 1996. "On the Validity of Season of Birth as an Instrument in Wage Equations: A Comment on Angrist & Krueger's "Does Compulsory School Attendance Affect Scho," NBER Working Papers 5835, National Bureau of Economic Research, Inc.
  11. Behrman, Jere R & Rosenzweig, Mark R & Taubman, Paul, 1994. "Endowments and the Allocation of Schooling in the Family and in the Marriage Market: The Twins Experiment," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1131-74, December.
  12. Pischke, Jorn-Steffen, 1995. "Measurement Error and Earnings Dynamics: Some Estimates from the PSID Validation Study," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 305-14, July.
  13. Behrman, Jere R. & Rosenzweig, Mark R., 1999. ""Ability" biases in schooling returns and twins: a test and new estimates," Economics of Education Review, Elsevier, vol. 18(2), pages 159-167, April.
  14. Joshua Angrist & Alan Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," Working Papers 653, Princeton University, Department of Economics, Industrial Relations Section..
  15. Griliches, Zvi, 1979. "Sibling Models and Data in Economics: Beginnings of a Survey," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S37-64, October.
  16. Miller, Paul W & Mulvey, Charles & Martin, Nick, 1995. "What Do Twins Studies Reveal about the Economic Returns to Education? A Comparison of Australian and U.S. Findings," American Economic Review, American Economic Association, vol. 85(3), pages 586-99, June.
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