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Education, Self-Selection and Intergenerational Transmission of Abilities

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  • Adalbert Mayer

Abstract

This paper shows that the relationships between earnings and college education across generations can be largely explained by the transmission of abilities. Notably, the positive relationship between the earnings of fathers and college attendance of sons does not require a role for credit constraints. Intergenerational relationships make it possible to infer the potential earnings of a person for different levels of education. I find that the average return to college is substantially below the difference in average earnings of workers with and without a college education. I consider an intergenerational self-selection model of education. Two distinct abilities are transmitted from parents to their children. One ability is useful in occupations that are obtained after receiving a college education; the other ability is utilized in occupations that do not require prior college training. The members of each generation decide whether to attend college in order to maximize their lifetime earnings. Using a simulated method of moments approach, I estimate the structural parameters of the model with data from the PSID. I am able to estimate the parameters of the model without the assumption made by Willis and Rosen (1979) that parental features affect the educational choice of a son, but are not correlated with unobserved determinants of the son\92s earnings. I obtain a positive correlation between skills used by college and high school educated workers, and I counter their finding of no ability bias.

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  • Adalbert Mayer, 2004. "Education, Self-Selection and Intergenerational Transmission of Abilities," 2004 Meeting Papers 107, Society for Economic Dynamics.
    • Handle: RePEc:red:sed004:107
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    References listed on IDEAS

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    1. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
    2. Carneiro, Pedro & Hansen, Karsten T. & Heckman, James J., 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," IZA Discussion Papers 767, Institute of Labor Economics (IZA).
    3. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "2001 Lawrence R. Klein Lecture Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 361-422, May.
    4. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, vol. 95(1), pages 437-449, March.
    5. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 7, pages 307-458, Elsevier.
    6. Erik Plug & Wim Vijverberg, 2003. "Schooling, Family Background, and Adoption: Is It Nature or Is It Nurture?," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 611-641, June.
    7. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
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    Cited by:

    1. Claver Sanz, Raúl, 2022. "¿Cómo evoluciona el nivel educativo entre generaciones en Asia (Pacífico y Oriente Medio)? [How is educational attainment evolving between generations in Asia (Pacific and Middle East)?]," MPRA Paper 111792, University Library of Munich, Germany.
    2. Vincenzo Caponi, 2011. "Intergenerational Transmission Of Abilities And Self‐Selection Of Mexican Immigrants," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 523-547, May.
    3. Mukoyama, Toshihiko & Sahin, Aysegul, 2006. "Costs of business cycles for unskilled workers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2179-2193, November.
    4. Montserrat Vilalta-Bufi(Universitat de Barcelona) & Ausias Ribo (Universitat de Barcelona), 2012. "Educational expansion, intergenerational mobility and over-education," Working Papers in Economics 284, Universitat de Barcelona. Espai de Recerca en Economia.
    5. Beetsma, Roel & Komada, Oliwia & Makarski, Krzysztof & Tyrowicz, Joanna, 2021. "The political (in)stability of funded social security," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    6. Claver Sanz, Raúl, 2022. "La transmisión intergeneracional de educación: evidencia en América Latina (1870 – 2010) [The Intergenerational Transmission of Education: Evidence from Latin America (1870 - 2010)]," MPRA Paper 111434, University Library of Munich, Germany.
    7. Regina Riphahn & Florian Schieferdecker, 2012. "The transition to tertiary education and parental background over time," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 635-675, January.
    8. Claver Sanz, Raúl, 2022. "Movilidad entre generaciones en países africanos: evidencia para la educación [Intergenerational mobility in African countries: evidence for education]," MPRA Paper 111678, University Library of Munich, Germany.

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    More about this item

    Keywords

    Return to education; intergenerational;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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