Structural Estimates of the Intergenerational Education Correlation

Christian Belzil () and Jörgen Hansen
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Jörgen Hansen: Concordia University, CIRANO, CIREQ and IZA Bonn

No 973, IZA Discussion Papers from Institute for the Study of Labor (IZA)

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.

Keywords: intergenerational education correlation; endogenous schooling; household characteristics; dynamic programming (search for similar items in EconPapers)
JEL-codes: J2 J3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2003-12
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