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Estimating the Effects of Family Background on the Return to Schooling

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  • Olivier Deschenes

    (University of California, Santa Barbara)

Abstract

This paper examines the causal association between family background characteristics--parental education and family size-and returns to schooling using data from the Occupational Change in a Generation Survey. I first develop a formal model of schooling and earnings, with heterogeneous returns to education. Family environment is shown to influence the marginal return to schooling through its effects on the marginal benefit and the marginal cost of an additional year of education. Using two types of exclusion restrictions, I find that men raised in larger families have substantially lower returns to education, while the combined effects of parental education on the returns to education are more modest. I also examine the difference between OLS and TSLS estimates of the return to schooling. Like other "supply-side" IV studies of the causal effect of education, this paper documents TSLS estimates that are larger than the corresponding OLS estimates. The results of this paper provide an alternative explanation for this phenomenon: constant marginal returns to schooling, combined with a negative ability bias and a positive self-selection bias (i.e. non-hierarchical sorting).

Suggested Citation

  • Olivier Deschenes, 2002. "Estimating the Effects of Family Background on the Return to Schooling," University of California at Santa Barbara, Economics Working Paper Series 10-02, Department of Economics, UC Santa Barbara.
    • Handle: RePEc:cdl:ucsbec:10-02
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    File URL: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1020&context=ucsbecon
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    Citations

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    Cited by:

    1. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2010. "Small Family, Smart Family? Family Size and the IQ Scores of Young Men," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
    2. Sandra E. Black & Erik Grönqvist & Björn Öckert, 2018. "Born to Lead? The Effect of Birth Order on Noncognitive Abilities," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 274-286, May.
    3. Black, Sandra E. & Devereux, Paul J. & Salvanes, Kjell G., 2004. "The More the Merrier? The Effect of Family Composition on Children's Education," IZA Discussion Papers 1269, Institute of Labor Economics (IZA).
    4. Song, Moohoun & Orazem, Peter, 2005. "Returns to Graduate and Professional Education: The Roles of Mathematical and Verbal Skills by Major," Staff General Research Papers Archive 12432, Iowa State University, Department of Economics.
    5. Song, Moohoun & Orazem, Peter F. & Wohlgemuth, Darin, 2008. "The role of mathematical and verbal skills on the returns to graduate and professional education," Economics of Education Review, Elsevier, vol. 27(6), pages 664-675, December.
    6. Sanni Breining & Joseph Doyle & David N. Figlio & Krzysztof Karbownik & Jeffrey Roth, 2020. "Birth Order and Delinquency: Evidence from Denmark and Florida," Journal of Labor Economics, University of Chicago Press, vol. 38(1), pages 95-142.
    7. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "The More the Merrier? The Effect of Family Size and Birth Order on Children's Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 669-700.

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