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Estimating the Effects of Family Background on the Return to Schooling

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  • Deschenes, Olivier

Abstract

This paper examines the causal association between family background characteristics--parental education and family size-and returns to schooling using data from the Occupational Change in a Generation Survey. I first develop a formal model of schooling and earnings, with heterogeneous returns to education. Family environment is shown to influence the marginal return to schooling through its effects on the marginal benefit and the marginal cost of an additional year of education. Using two types of exclusion restrictions, I find that men raised in larger families have substantially lower returns to education, while the combined effects of parental education on the returns to education are more modest. I also examine the difference between OLS and TSLS estimates of the return to schooling. Like other “supply-side†IV studies of the causal effect of education, this paper documents TSLS estimates that are larger than the corresponding OLS estimates. The results of this paper provide an alternative explanation for this phenomenon: constant marginal returns to schooling, combined with a negative ability bias and a positive self-selection bias (i.e. non-hierarchical sorting).

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  • Deschenes, Olivier, 2002. "Estimating the Effects of Family Background on the Return to Schooling," University of California at Santa Barbara, Economics Working Paper Series qt2qm3867s, Department of Economics, UC Santa Barbara.
  • Handle: RePEc:cdl:ucsbec:qt2qm3867s
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    Cited by:

    1. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2010. "Small Family, Smart Family? Family Size and the IQ Scores of Young Men," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
    2. Zhong, Hai, 2014. "The effect of sibling size on children's health: a regression discontinuity design approach based on China's one-child policy," China Economic Review, Elsevier, vol. 31(C), pages 156-165.
    3. Black, Sandra E. & Grönqvist, Erik & Öckert, Björn, 2016. "Born to lead? The effect of birth order on non-cognitive abilities," Working Paper Series 2016:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    4. Andrea Mercatanti, 2008. "A likelihood-based analysis for relaxing the exclusion restriction in randomized experiments with imperfect compliance," Temi di discussione (Economic working papers) 683, Bank of Italy, Economic Research and International Relations Area.
    5. Pohlmeier, Winfried & Pfeiffer, Friedhelm & Maier, Michael, 2004. "Returns to Education and Individual Heterogeneity," ZEW Discussion Papers 04-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Sandra E. Black & Paul G. Devereux & Kjell G. Salvanes, 2004. "The More the Merrier? The Effect of Family Composition on Children's Education," NBER Working Papers 10720, National Bureau of Economic Research, Inc.
    7. Song, Moohoun & Orazem, Peter, 2005. "Returns to Graduate and Professional Education: The Roles of Mathematical and Verbal Skills by Major," Staff General Research Papers Archive 12432, Iowa State University, Department of Economics.
    8. Feng Yao & Junsen Zhang, 2015. "Efficient kernel-based semiparametric IV estimation with an application to resolving a puzzle on the estimates of the return to schooling," Empirical Economics, Springer, pages 253-281.
    9. Sanni Breining & Joseph Doyle & David N. Figlio & Krzysztof Karbownik & Jeffrey Roth, 2017. "Birth Order and Delinquency: Evidence from Denmark and Florida," CESifo Working Paper Series 6330, CESifo Group Munich.
    10. Pedro Carneiro & Sokbae Lee, 2009. "Trends in quality-adjusted skill premia in the United States, 1960-2000," CeMMAP working papers CWP02/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    11. Subhayu Bandyopadhyay & Howard J. Wall, 2010. "Immigration and Outsourcing: A General-Equilibrium Analysis," Review of Development Economics, Wiley Blackwell, pages 433-446.
    12. Kasey S. Buckles & Elizabeth L. Munnich, 2012. "Birth Spacing and Sibling Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 47(3), pages 613-642.
    13. Song, Moohoun & Orazem, Peter F. & Wohlgemuth, Darin, 2008. "The role of mathematical and verbal skills on the returns to graduate and professional education," Economics of Education Review, Elsevier, vol. 27(6), pages 664-675, December.
    14. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "The More the Merrier? The Effect of Family Size and Birth Order on Children's Education," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 669-700.
    15. repec:got:cegedp:108 is not listed on IDEAS
    16. Pedro Carneiro & Sokbae Lee, 2011. "Trends in Quality-Adjusted Skill Premia in the United States, 1960-2000," American Economic Review, American Economic Association, vol. 101(6), pages 2309-2349, October.
    17. Krenz, Astrid, 2010. "La distinction reloaded: Returns to education, family background, cultural and social capital in Germany," Center for European, Governance and Economic Development Research Discussion Papers 108, University of Goettingen, Department of Economics.

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    Keywords

    Estimating; Effects; Family Background; Return; Schooling;

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