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Structural Estimates of the Intergenerational Education Correlation

  • Jörgen Hansen
  • Christian Belzil

Using a structural dynamic programming model, we investigate the relative importance of family background variables and individual specific abilities in explaining cross-sectional differences in schooling attainments and wages. Given scholastic ability, household background variables (especially parents' education) account for 68% of the explained cross- sectional variations in schooling attainments. When the effects of household background variables on ability are also taken into account, the percentage raises to 85%. However, individual differences in wages are mostly explained by abilities. Only 27% of the explained variation in wages is accounted for by parents’ background variables as opposed to 73% by unobserved abilities (orthogonal to family background variables). When scholastic ability is correlated with family background variables, ability endowments explain as much as 81% of individual wages. [Working Paper No. 973]

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Paper provided by eSocialSciences in its series Working Papers with number id:2892.

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Date of creation: Sep 2010
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Handle: RePEc:ess:wpaper:id:2892
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  1. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
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