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The co-twin methodology and returns to schooling — testing a critical assumption

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  • Sandewall, Örjan
  • Cesarini, David
  • Johannesson, Magnus

Abstract

Twins-based estimates of the return to schooling have featured prominently in the economics of education literature. Their unbiasedness hinges critically on the assumption that within-pair variation in schooling is explained by factors unrelated to wage earning ability. This paper develops a framework for testing this assumption and shows, in a large sample of monozygotic twins, that the twins-based estimated return to schooling falls if adolescent IQ test scores are included in the wage equation. Using birth weight as an alternative proxy for ability yields qualitatively similar results. Our results thus cast doubt on the validity of twins-based estimates.

Suggested Citation

  • Sandewall, Örjan & Cesarini, David & Johannesson, Magnus, 2014. "The co-twin methodology and returns to schooling — testing a critical assumption," Labour Economics, Elsevier, vol. 26(C), pages 1-10.
    • Handle: RePEc:eee:labeco:v:26:y:2014:i:c:p:1-10
    DOI: 10.1016/j.labeco.2013.10.002
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    1. Twins as an economic model
      by Kevin Denny in Geary Behaviour Centre on 2009-09-02 12:19:00

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    9. Petri Böckerman & Pekka Ilmakunnas & Jari Vainiomäki, 2018. "Using Twins to Resolve the Twin Problem of Having a Bad Job and a Low Wage," Manchester School, University of Manchester, vol. 86(2), pages 155-177, March.
    10. Berner Shalem, Rachel & Cornaglia, Francesca & De Neve, Jan-Emmanuel, 2012. "The enduring impact of childhood experience on mental health: evidence using instrumented co-twin data," LSE Research Online Documents on Economics 51522, London School of Economics and Political Science, LSE Library.
    11. Ukaj MIC & Mustafa Topxhiu RAHMIJE, 2019. "The returns to investment in education: Some theoretical and empirical insights," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 193-203.
    12. Mortensen, Laust H., 2013. "Socioeconomic inequality in birth weight and gestational age in Denmark 1996–2007: Using a family-based approach to explore alternative explanations," Social Science & Medicine, Elsevier, vol. 76(C), pages 1-7.
    13. Amin, Vikesh & Behrman, Jere R. & Spector, Tim D., 2013. "Does more schooling improve health outcomes and health related behaviors? Evidence from U.K. twins," Economics of Education Review, Elsevier, vol. 35(C), pages 134-148.
    14. Lundborg, Petter & Nilsson, Anton & Rooth, Dan-Olof, 2011. "Does Early Life Health Predict Schooling Within Twin Pairs?," IZA Discussion Papers 5803, Institute of Labor Economics (IZA).
    15. Xue, Sen & Kidd, Michael P. & Le, Anh T. & Kirk, Kathy & Martin, Nicholas G., 2019. "The Role of Locus of Control in Education, Occupation, Income and Healthy Habits: Evidence from Australian Twins," GLO Discussion Paper Series 371, Global Labor Organization (GLO).
    16. Lång, Elisabeth & Nystedt, Paul, 2018. "Two by two, inch by inch: Height as an indicator of environmental conditions during childhood and its influence on earnings over the life cycle among twins," Economics & Human Biology, Elsevier, vol. 28(C), pages 53-66.
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    19. Xue, Sen & Kidd, Michael P. & Le, Anh.T. & Kirk, Kathy & Martin, Nicholas G., 2020. "The role of locus of control in adulthood outcomes: Evidence from Australian twins," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 566-588.
    20. Gerdtham, Ulf-G & Lundborg, Petter & Lyttkens, Carl Hampus & Nystedt, Paul, 2012. "Do Socioeconomic Factors Really Explain Income-Related Inequalities in Health? Applying a Twin Design to Standard Decomposition Analysis," Working Papers 2012:21, Lund University, Department of Economics.
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    22. Maczulskij, Terhi & Viinikainen, Jutta, 2018. "Is personality related to permanent earnings? Evidence using a twin design," Journal of Economic Psychology, Elsevier, vol. 64(C), pages 116-129.
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    More about this item

    Keywords

    Returns to schooling; Twins; Equal ability assumption;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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