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A Human Capital Model of the Effects of Abilities and Family Background on Optimal Schooling Levels

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Author Info

  • Regan, Tracy L.

    ()
    (University of Miami)

  • Burghardt, Galen

    ()
    (Calyon Financial)

  • Oaxaca, Ronald L.

    ()
    (University of Arizona)

Abstract

This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using NLSY79 data we stratify our sample into one-year "FTE" work experience cohorts for 1985-1989. Mincer's (1974) "overtaking" cohort (the years of work experience at which individuals' observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of work experience yielding on average a rate of return of 9.6 percent and an average (optimal) 11.4 years of schooling.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1927.

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Length: 45 pages
Date of creation: Jan 2006
Date of revision:
Publication status: published in: Economic Inquiry, 2007, 45 (4), 721-738
Handle: RePEc:iza:izadps:dp1927

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Keywords: family background; ability; human capital; schooling; earnings;

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