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Structural Estimates of the Intergenerational Education Correlation

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  • Jörgen Hansen
  • Christian Belzil

Abstract

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]

Suggested Citation

  • Jörgen Hansen & Christian Belzil, 2010. "Structural Estimates of the Intergenerational Education Correlation," Working Papers id:2892, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:2892
    Note: Institutional Papers
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    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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