Education, Self-Selection and Intergenerational Transmission of Abilities
AbstractThis paper shows that the relationships between earnings and college education across generations can be largely explained by the transmission of abilities. Notably, the positive relationship between the earnings of fathers and college attendance of sons does not require a role for credit constraints. Intergenerational relationships make it possible to infer the potential earnings of a person for different levels of education. I find that the average return to college is substantially below the difference in average earnings of workers with and without a college education. I consider an intergenerational self-selection model of education. Two distinct abilities are transmitted from parents to their children. One ability is useful in occupations that are obtained after receiving a college education; the other ability is utilized in occupations that do not require prior college training. The members of each generation decide whether to attend college in order to maximize their lifetime earnings. Using a simulated method of moments approach, I estimate the structural parameters of the model with data from the PSID. I am able to estimate the parameters of the model without the assumption made by Willis and Rosen (1979) that parental features affect the educational choice of a son, but are not correlated with unobserved determinants of the son’s earnings. I obtain a positive correlation between skills used by college and high school educated workers, and I counter their finding of no ability bias.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 107.
Date of creation: 2004
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Return to education; intergenerational;
Other versions of this item:
- Adalbert Mayer, 2008. "Education, Self-Selection, and Intergenerational Transmission of Abilities," Journal of Human Capital, University of Chicago Press, vol. 2(1), pages 106-128.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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- Vincenzo Caponi, 2009.
"Intergenerational Transmission of Abilities and Self Selection of Mexican Immigrants,"
2009 Meeting Papers
1144, Society for Economic Dynamics.
- Vincenzo Caponi, 2011. "Intergenerational Transmission Of Abilities And Self‐Selection Of Mexican Immigrants," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 523-547, 05.
- Vincenzo Caponi, 2009. "Intergenerational Transmission of Abilities and Self Selection of Mexican Immigrants," Working Papers 002, Ryerson University, Department of Economics.
- Caponi, Vincenzo, 2006. "Intergenerational Transmission of Abilities and Self Selection of Mexican Immigrants," IZA Discussion Papers 2431, Institute for the Study of Labor (IZA).
- Vincenzo Caponi, 2007. "Intergenerational Transmission of Abilities and Self Selection of Mexican Immigrants," Working Paper Series 20-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
- Toshihiko Mukoyama & Aysegul Sahin, 2005.
"Costs of Business Cycles for Unskilled Workers,"
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- Regina Riphahn & Florian Schieferdecker, 2008.
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- Regina Riphahn & Florian Schieferdecker, 2012. "The transition to tertiary education and parental background over time," Journal of Population Economics, Springer, vol. 25(2), pages 635-675, January.
- Toshihiko Mukoyama & Aysegül Sahin, 2005. "The cost of business cycles for unskilled workers," Staff Reports 214, Federal Reserve Bank of New York.
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