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A Human Capital Model Of The Effects Of Ability And Family Background On Optimal Schooling Levels

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  • TRACY L. REGAN
  • RONALD L. OAXACA
  • GALEN BURGHARDT

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 the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1‐yr full‐time equivalent (FTE) work experience cohorts for 1985–1989. The estimated Mincerian “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 experience, yielding on average a rate of return of 10.3% and an average (optimal) 11.4 yr of schooling. (JEL J24, J31, J22)

Suggested Citation

  • Tracy L. Regan & Ronald L. Oaxaca & Galen Burghardt, 2007. "A Human Capital Model Of The Effects Of Ability And Family Background On Optimal Schooling Levels," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 721-738, October.
  • Handle: RePEc:bla:ecinqu:v:45:y:2007:i:4:p:721-738
    DOI: 10.1111/j.1465-7295.2007.00058.x
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    More about this item

    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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