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Education and Earnings Differentials: The Role of Family Background Across European Countries

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  • Rosalia Castellano

    ()
    (Department of Statistics and Mathematics for Economic Research, University of Naples Parthenope)

  • Gennaro Punzo

    ()
    (Department of Statistics and Mathematics for Economic Research, University of Naples Parthenope)

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    Abstract

    The crucial aim of this paper is to investigate, in a generational perspective, the effects of specific dimensions of human capital on individuals earnings and earnings differentials across a selected set of six developed economies of Western Europe with structural differences in their formal education systems and, more generally, in their institutional frameworks. In a cross-country comparison, we intend to inspect how formal education and work experience stand for critical predictors of inequality between and within earner-groups and/or educational groups. In this light, the role of family background on individuals’ earnings in relation to the two main occupational status (i.e., wage-employment rather than self-employment) and, in particular, the impact of parental education and abilities on children’s human capital are argued as well. In order to look into the critical determinants of intergenerational im-mobility, in terms of educational and employment decision-making process, and to what extent they vary across countries, two-stage structural probit models with quantile regressions in the second stage are estimated. As we expect that individual earnings also depend on a range of personal and structural factors and on the family background as well, a set of human capital earnings equations, based on extensions of Mincer models, are estimated by the main employment status. Microdata come from EU-SILC survey, the main new reference source for comparative statistics at European level, which also detects a set of retrospective parental information allowing to account for potential generational changes over time. Briefly, empirical results are interesting, taken as a whole. Although not a few determinants appear to be relatively similar across countries, wider national-specific differentials are drawn. Most of all, it emerges how each component of human capital differently affects individuals’ earnings and earnings inequality across European countries and, most importantly, how this impact differs along the whole earnings distributions. Also, quite dissimilar patterns of influence of family-specific background on children’s outcomes across countries is sketched.

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    Paper provided by AlmaLaurea Inter-University Consortium in its series Working Papers with number 28.

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    Length: 21
    Date of creation: Sep 2011
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    Handle: RePEc:laa:wpaper:28

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    1. Roberto Torrini, 2002. "Cross-country differences in self-employment rates: the role of institutions," Temi di discussione (Economic working papers) 459, Bank of Italy, Economic Research and International Relations Area.
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    3. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-46, December.
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    8. Orley Ashenfelter & David J. Zimmerman, 1997. "Estimates Of The Returns To Schooling From Sibling Data: Fathers, Sons, And Brothers," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 1-9, February.
    9. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
    10. Parker,Simon C., 2006. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521030632, Fall.
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    13. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
    14. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
    15. Axel Dreher & Noel Gaston, 2006. "Has globalization increased inequality?," KOF Working papers 06-140, KOF Swiss Economic Institute, ETH Zurich.
    16. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
    17. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
    18. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October.
    19. Omer Gokcekus & Amy Muedin, 2008. "Quantifying corruption by a human capital earnings equation," International Review of Economics, Springer, vol. 55(3), pages 243-252, September.
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