A Human Capital Model of the Effects of Abilities and Family Background on Optimal Schooling Levels

Tracy Regan, Galen Burghardt (galen.burghardt@gsb.uchicago.edu) and Ronald Oaxaca
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Galen Burghardt: Calyon Financial

No 1927, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using NLSY79 data we stratify our sample into one-year "FTE" work experience cohorts for 1985-1989. Mincer's (1974) "overtaking" cohort (the years of work experience at which individuals' observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of work experience yielding on average a rate of return of 9.6 percent and an average (optimal) 11.4 years of schooling.

Keywords: family background; ability; human capital; schooling; earnings (search for similar items in EconPapers)
JEL-codes: J22 J24 J31 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2006-01
New Economics Papers: this item is included in nep-edu, nep-hrm and nep-lab
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Citations: View citations in EconPapers (2)

Published - published in: Economic Inquiry, 2007, 45 (4), 721-738

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