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Structural Estimates of the Intergenerational Education Correlation

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  • Belzil, Christian

    ()
    (Ecole Polytechnique, Paris)

  • Hansen, Jörgen

    ()
    (Concordia University)

Abstract

Using a structural dynamic programming model, we investigate the relative importance of family background variables and individual specific abilities in explaining cross-sectional differences in schooling attainments and wages. Given scholastic ability, household background variables (especially parents' education) account for 68% of the explained crosssectional variations in schooling attainments. When the effects of household background variables on ability are also taken into account, the percentage raises to 85%. However, individual differences in wages are mostly explained by abilities. Only 27% of the explained variation in wages is accounted for by parents’ background variables as opposed to 73% by unobserved abilities (orthogonal to family background variables). When scholastic ability is correlated with family background variables, ability endowments explain as much as 81% of individual wages.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 973.

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Length: 29 pages
Date of creation: Dec 2003
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2003, 18 (6), 679-69
Handle: RePEc:iza:izadps:dp973

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Related research

Keywords: dynamic programming; household characteristics; endogenous schooling; intergenerational education correlation;

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  1. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
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