Individual Characteristics and Earnings

Nurfatima Jandarova () and Aldo Rustichini ()
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Nurfatima Jandarova: Tampere University, Finnish Centre of Excellence in Tax Systems Research (FIT)
Aldo Rustichini: University of Minnesota

No 26, Working Papers from Finnish Centre of Excellence in Tax Systems Research

Abstract: We study how observed individual characteristics affect earnings of individuals. The characteristics we study are individual personality traits (including cognitive ability) and family background. We make use of data providing information on the individual characteristics rather than estimating them as latent variables. Their contribution may be indirect (facilitating the acquisition of education) or direct (perhaps affecting productivity). We estimate the fraction of these two contributions through regression analysis and structural model, and find that the contribution of both pathways is significant. These characteristics may be in part determined endogenously. To estimate the proportion due to original individual characteristics we use measures provided by Polygenic Scores for education years and fluid intelligence. The marginal effects of these scores is significant and high. The indirect contribution (operating though acquisition of college) is around one third of the total effect.

Keywords: education; cognitive skills; noncognitive skills; family background; polygenic score (search for similar items in EconPapers)
JEL-codes: I21 J24 (search for similar items in EconPapers)
Pages: 43
Date: 2024-10
New Economics Papers: this item is included in nep-lma
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Published in FIT Working Paper Series, Finnish Center of Excellence in Tax Systems Research

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