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The Co-twin Methodology and Returns to Schooling – Testing a Critical Assumption

  • Sandewall, Örjan

    ()

    (London School of Economics)

  • Cesarini, David

    ()

    (Department of Economics)

  • Johannesson, Magnus

    (Department of Economics)

Twins-based estimates of the return to schooling feature prominently in the labor economics literature. The validity of such estimates hinges critically on the assumption that within-pair variation in schooling is explained by factors which are unrelated to wage earning ability. This paper develops a framework for testing this assumption, and finds, using a unique dataset of monozygotic twins, strong evidence against it. Di¤erences in adolescent IQ test scores predict within-pair variation in educational attainment, and including IQ in the wage equation causes within-pair point estimates for the returns to schooling to decline significantly. Our results thus cast doubt on the validity of estimates derived from the co-twin literature.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 806.

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Length: 37 pages
Date of creation: 24 Aug 2009
Date of revision:
Handle: RePEc:hhs:iuiwop:0806
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