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Double Trouble: On the Value of Twins-Based Estimation of the Return to Schooling

John Bound and Gary Solon

No 6721, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Several recent studies use the schooling and wage variation between monozygotic twins to estimate the return to schooling. In this paper, we summarize the results from this literature, and we examine the implications of endogenous determination of which twin goes to school longer and of measuring schooling with (possibly mean-reverting) error. Endogeneity of between-twins schooling variation is strongly suggested by the extensive (mostly non-economic) literature documenting that the between-twins difference in birth weight is correlated with the between-twins differences in both schooling and IQ. We conclude that twins-based estimation is vulnerable to the same sort of inconsistency that afflicts conventional cross-sectional estimation. We argue, however, that, if one starts with the presumption that endogenous schooling induces upward inconsistency in the estimated return to schooling, the new twins-based estimates may complement other approaches to tightening the upper bound on the return to schooling.

JEL-codes: J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 1998-09
Note: LS
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Published as Economics of Education Review, Vol. 18, no. 2 (April 1999): 169-182

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