Selection Bias in Educational Transition Models: Theory and Empirical Evidence

Most studies which use Mare’s (1980, 1981) seminal model of educational transitions find that the effect of family background variables decreases across educational transitions. Cameron and Heckman (1998, 2001) have argued that this “waning coefficients” phenomenon might be driven by selection on unobserved variables. This paper, first, analyzes theoretically how selection on unobserved variables leads to waning coefficients and, second, illustrates empirically how selection affects estimates of the effect of family background variables on educational transitions. Our empirical analysis which uses data from the United States, United Kingdom, Denmark, and the Netherlands shows that the effect of family background variables on educational transitions is largely constant across transitions when we control for selection on unobserved variables. We also discuss the inherent difficulties in estimating educational transition models which deal effectively with selection on unobserved variables.