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Structural Estimates of the Intergenerational Education Correlation

Author

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  • Belzil, Christian

    (Ecole Polytechnique, Paris)

  • Hansen, Jörgen

    (Concordia University)

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 crosssectional 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.

Suggested Citation

  • Belzil, Christian & Hansen, Jörgen, 2003. "Structural Estimates of the Intergenerational Education Correlation," IZA Discussion Papers 973, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp973
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    References listed on IDEAS

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    1. 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.
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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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