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Genetic Endowments and Lifetime Earnings: Understanding the Mechanisms

Author

Listed:
  • Bolt, U.
  • French, E.
  • Warrier, V.
  • Yang, Q.
  • Zhang, W.

Abstract

This paper investigates how genetic endowments influence lifetime earnings using a dynamic life cycle model and longitudinal data from a cohort tracked from birth to retirement. We examine genetic impacts on skill formation as well as choices of parental investments, educational attainment, and occupation. A one standard deviation increase in the polygenic score for educational attainment raises lifetime earnings by 18.9%. Although part of this effect is due to genetic endowments impacting skill formation, the majority is due to genetic endowments impacting choices. Extending our analysis to include polygenic scores for additional traits reveals other channels through which they operate. Furthermore, our estimates show that genetic endowments and investments are substitutes in the production of earnings during early childhood but are complements later in life, highlighting the crucial importance of early-life interventions to effectively mitigate genetic inequalities.

Suggested Citation

  • Bolt, U. & French, E. & Warrier, V. & Yang, Q. & Zhang, W., 2025. "Genetic Endowments and Lifetime Earnings: Understanding the Mechanisms," Cambridge Working Papers in Economics 2547, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2547
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    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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