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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
Tracy L. Regan () (University of Miami)
Galen Burghardt () (Calyon Financial)
Ronald L. Oaxaca () (University of Arizona and IZA Bonn)

Additional information is available for the following registered author(s):

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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Publisher 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:
Handle: RePEc:iza:izadps:dp1927

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

Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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References listed on IDEAS
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    Other versions:
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    Other versions:
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    Other versions:
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    Other versions:
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