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The Roles of Education, Skill and Parental Income in Determining Wages

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  • Isaac C. Rischall

Abstract

This study attempts to examine how much of the correlation in incomes across generations can be explained by education and skill. I find two different answers to this question depending on how I instrument for years of schooling. Using quarter of birth and proximity to a local college as instruments, I find high returns to schooling, low returns to skill, and most of the intergenerational mobility coefficient explained. However, these instruments are poorly correlated with years of education. Thus, the estimates are imprecise and potentially biased. Furthermore, using family background variables as instruments, I find the opposite results.

Suggested Citation

  • Isaac C. Rischall, "undated". "The Roles of Education, Skill and Parental Income in Determining Wages," Canadian International Labour Network Working Papers 29, McMaster University.
  • Handle: RePEc:mcm:cilnwp:29
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/CILN/cilnwp29.pdf
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    References listed on IDEAS

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    1. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 7-36, October.
    2. Nelson, Charles R & Startz, Richard, 1990. "The Distribution of the Instrumental Variables Estimator and Its t-Ratio When the Instrument Is a Poor One," The Journal of Business, University of Chicago Press, vol. 63(1), pages 125-140, January.
    3. Nelson, Charles R & Startz, Richard, 1990. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 58(4), pages 967-976, July.
    4. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
    5. A. Abigail Payne & Aloysius Siow, 1998. "Estimating the Effects of Federal Research Funding on Universities using Alumni Representation on Congressional Appropriations Committees," Working Papers siow-99-02, University of Toronto, Department of Economics.
    6. Behrman, Jere & Tarbman, Paul, 1985. "Intergenerational Earnings Mobility in the United States: Some Estimates and a Test of Becker's Intergenerational Endowments Model," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 144-151, February.
    7. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    8. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, and Ability: Evidence from a New Sample of Identical Twins," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 253-284.
    9. John Bound & David A. Jaeger, 1996. "On the Validity of Season of Birth as an Instrument in Wage Equations: A Comment on Angrist & Krueger's "Does Compulsory School Attendance Affect Scho," NBER Working Papers 5835, National Bureau of Economic Research, Inc.
    10. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
    11. Griliches, Zvi, 1979. "Sibling Models and Data in Economics: Beginnings of a Survey," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 37-64, October.
    12. Orley Ashenfelter & David J. Zimmerman, 1997. "Estimates Of The Returns To Schooling From Sibling Data: Fathers, Sons, And Brothers," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 1-9, February.
    13. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-429, June.
    14. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    15. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-1173, December.
    16. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-895, October.
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