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Estimating the Intergenerational Education Correlation from a Dynamic Programming Model

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  • Christian Belzil
  • Jörgen Hansen

Abstract

Using a structural dynamic programming model, we investigate the relative importance of initial household human capital endowments and unobserved individual abilities in explaining cross-sectional differences in schooling attainments and wages. We evaluate the true intergenerational education correlation and the effect of an exogenous increase in human capital of the current generation on schooling attainments of the next generation. We find that the variation in schooling attainments explained by differences in household human capital is twice as large as the variation explained by unobserved abilities. However, the variation in labor market wages explained by differences in unobserved abilities is 3 times larger than the variation explained by household human capital endowments. We also find that the true partial correlations between son and father's schooling and between son and mother's education are respectively 17% and 40% lower than the sample correlations. Increasing the level of schooling of the current generation by one year raises schooling attainments of the next generation by 0.4 year. ¸ l'aide d'un modèle de programmation dynamique, nous analysons l'importance relative des antécédents familiaux et de l'habilité non-observée dans la détermination du niveau de scolarité et des salaires. Nous évaluons aussi la corrélation intergénérationelle au niveau de l'éducation et déterminons l'effet d'une augmentation exogène du niveau de scolarité de la génération présente sur le niveau d'éducation de la génération future.

Suggested Citation

  • Christian Belzil & Jörgen Hansen, 2001. "Estimating the Intergenerational Education Correlation from a Dynamic Programming Model," CIRANO Working Papers 2001s-20, CIRANO.
  • Handle: RePEc:cir:cirwor:2001s-20
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    File URL: http://www.cirano.qc.ca/files/publications/2001s-20.pdf
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    References listed on IDEAS

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    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
    3. Thierry Magnac & David Thesmar, 1999. "Identifying Dynamic Discrete Choice Models : An Application to School-Leaving in France," Working Papers 99-16, Center for Research in Economics and Statistics.
    4. Christian Belzil & Jörgen Hansen, 2002. "Unobserved Ability and the Return to Schooling," Econometrica, Econometric Society, vol. 70(5), pages 2075-2091, September.
    5. Lazear, Edward P, 1980. "Family Background and Optimal Schooling Decisions," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 42-51, February.
    6. Zvi Eckstein & Kenneth I. Wolpin, 1999. "Why Youths Drop Out of High School: The Impact of Preferences, Opportunities, and Abilities," Econometrica, Econometric Society, vol. 67(6), pages 1295-1340, November.
    7. Topel, Robert, 1999. "Labor markets and economic growth," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 44, pages 2943-2984 Elsevier.
    8. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Christian Belzil & Jörgen Hansen, 2002. "Unobserved Ability and the Return to Schooling," Econometrica, Econometric Society, vol. 70(5), pages 2075-2091, September.

    More about this item

    Keywords

    Intergenerational education correlation; returns to education; household human capital; growth; schooling decision; Corrélation intergénérationelle de l'éducation; rendements en éducation; capital humain du foyer; croissance; décision d'études;

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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