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Estimating the economic return to educational levels using data on twins

Author

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  • Gunnar Isacsson

    (Swedish National Road and Transport Research Institute, Borlänge, Sweden)

Abstract

This paper relaxes some restrictions of previous twin-based estimates of the effects of education on earnings. First, it estimates the earnings premiums associated with different educational levels. Second, it estimates a piecewise linear relationship between the natural logarithm of annual earnings and years of schooling. Third, the measurement error corrections are based on a less restrictive, 'non-classical', measurement error model. The estimation strategy implies that ability bias can be investigated separately in different parts of the educational distribution. The linear relationship between the logarithm of annual earnings and years of schooling is rejected. Furthermore, the results in the sample of identical (MZ) twins indicated both that the ability bias could be of different signs and of different magnitudes in different parts of the educational distribution. The twin-based estimates in the sample of fraternal (DZ) twins did not display any marked differences as compared to the cross-sectional estimates. Finally, the results indicated that the error-corrected twin-based estimates of the average return to years of schooling that rely on a classical measurement error model are upwards biased by approximately 30%. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Gunnar Isacsson, 2004. "Estimating the economic return to educational levels using data on twins," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 99-119.
  • Handle: RePEc:jae:japmet:v:19:y:2004:i:1:p:99-119 DOI: 10.1002/jae.724
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    References listed on IDEAS

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    Cited by:

    1. Hällsten, Martin, 2012. "Is it ever too late to study? The economic returns on late tertiary degrees in Sweden," Economics of Education Review, Elsevier, vol. 31(1), pages 179-194.
    2. Nabanita Datta Gupta & Nina Smith & Leslie S. Stratton, 2007. "Is Marriage Poisonous? Are Relationships Taxing? An Analysis of the Male Marital Wage Differential in Denmark," Southern Economic Journal, Southern Economic Association, vol. 74(2), pages 412-433, October.
    3. Manudeep Bhuller & Magne Mogstad & Kjell G. Salvanes, 2017. "Life-Cycle Earnings, Education Premiums, and Internal Rates of Return," Journal of Labor Economics, University of Chicago Press, vol. 35(4), pages 993-1030.
    4. Mellander, Erik, 2016. "On the use of register data in educational science research," Working Paper Series 2016:22, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    5. Paul Bingley & Vibeke Myrup Jensen & Ian Walker, 2007. "The Effect of School Class Size on Post-Compulsory Education: Some Cost Benefit Analysis," Working Papers 200717, Geary Institute, University College Dublin.
    6. Manudeep Bhuller & Magne Mogstad & Kjell G.Salvanes, 2011. "Life-cycle bias and the returns to schooling in current and lifetime earnings," Discussion Papers 666, Statistics Norway, Research Department.
    7. van der Loos, Matthijs J. H. M. & Benjamin, Daniel J. & Cesarini, David & Dawes, Christopher T. & Koellinger, Philipp D. & Magnusson, Patrik K. E. & Chabris, Christopher F. & Conley, Dalton & Laibson,, 2012. "The Genetic Architecture of Economic and Political Preferences," Scholarly Articles 10121961, Harvard University Department of Economics.
    8. Lång, Elisabeth & Nystedt, Paul, 2016. "Learning For Life? The Effects of Schooling on Earnings and Health- Related Behavior Over the Life Cycle," LiU Working Papers in Economics 4, Division of Economics, Department of Management and Engineering, Linköping University.
    9. Nilsson, William, 2005. "Heterogeneity or True State Dependence in Poverty - The tale told by twins," Umeå Economic Studies 650, Umeå University, Department of Economics.
    10. Petter Lundborg & Anton Nilsson & Dan-Olof Rooth, 2016. "The health-schooling relationship: evidence from Swedish twins," Journal of Population Economics, Springer;European Society for Population Economics, pages 1191-1215.
    11. Björklund, Anders, 2006. "Family Background and Outcomes Later in Life: A (Partial and Personal) Survey of Recent Research Using Swedish Register Data," Working Paper Series 4/2007, Swedish Institute for Social Research.
    12. 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.
    13. William Nilsson, 2012. "Heterogeneity Or True State Dependence In Poverty: The Tale Told By Twins," Review of Income and Wealth, International Association for Research in Income and Wealth, pages 1-23.
    14. David Cesarini & Magnus Johannesson & Patrik K. E. Magnusson & Björn Wallace, 2012. "The Behavioral Genetics of Behavioral Anomalies," Management Science, INFORMS, pages 21-34.
    15. Böhlmark, Anders, 2008. "Age at immigration and school performance: A siblings analysis using swedish register data," Labour Economics, Elsevier, vol. 15(6), pages 1366-1387, December.
    16. Lundborg, Petter & Nilsson, Anton & Rooth, Dan-Olof, 2011. "Does Early Life Health Predict Schooling Within Twin Pairs?," IZA Discussion Papers 5803, Institute for the Study of Labor (IZA).
    17. Manudeep Bhuller & Magne Mogstad & Kjell G.Salvanes, 2011. "Life-cycle bias and the returns to schooling in current and lifetime earnings," Discussion Papers 666, Statistics Norway, Research Department.
    18. Bingley, Paul & Jensen, Vibeke Myrup & Walker, Ian, 2005. "The Effects of School Class Size on Length of Post-Compulsory Education: Some Cost-Benefit Analysis," IZA Discussion Papers 1605, Institute for the Study of Labor (IZA).
    19. NAKAMURO Makiko & INUI Tomohiko, 2012. "Estimating the Returns to Education Using a Sample of Twins - The case of Japan -," Discussion papers 12076, Research Institute of Economy, Trade and Industry (RIETI).

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