Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20209
Authors: 
Belzil, Christian
Hansen, Jörgen
Year of Publication: 
2003
Series/Report no.: 
IZA Discussion paper series 973
Abstract: 
Using a structural dynamic programming model, we investigate the relative importance of family background variables and individual specific abilities in explaining cross-sectional differences in schooling attainments and wages. Given scholastic ability, household background variables (especially parents' education) account for 68% of the explained crosssectional variations in schooling attainments. When the effects of household background variables on ability are also taken into account, the percentage raises to 85%. However, individual differences in wages are mostly explained by abilities. Only 27% of the explained variation in wages is accounted for by parents? background variables as opposed to 73% by unobserved abilities (orthogonal to family background variables). When scholastic ability is correlated with family background variables, ability endowments explain as much as 81% of individual wages.
Subjects: 
intergenerational education correlation
endogenous schooling
household characteristics
dynamic programming
JEL: 
J3
J2
Document Type: 
Working Paper

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