Continuation of NLS Discussion Paper 92-13 Part 3 of 3 This version of the paper was split for web delivery. 3 ~apter Effects of Parentil ~aractertitics ad Mor tibt on the Re-m “to Edu~tion, ~erience Joseph G. Altonj i ~0~ A. W IntrO&ctiOn ~is chapter exaines whether the education and experience wages vary sys thematically with cognitive ability and with f~ily charact.eristics that ifiluence the quantity of formal education question is of interest for two reasons. First, experience mile enomous between these two variables, seeking to measure the relationship only a few studies have ex~ined return to these variables little is knom influences education and of ttie spent in the labor market. ‘ - of children. me ti=. In particular, of is suqris ing in 1igh:.. the effects of.. and on the income literature on parental effects on children’s on the direct effect of ifierited ability and family enviro~ent 143 are earnings and the wage benefits at taiment levels’ rather than on the effects of these variables ~ii there is an of the fact that there is an extensive literature docwenting parental character,istics on both the educational chosen. the extent to which the depends on worker characters about how family background background and education among the two.most. ~portant. .determinants of earnings. literature slopes of income focuses on wage On the rate of return to education and experience. 1 Some educational attaiment studies have exmined the influence of parents’ education and financial resources on years of schooling and achievement parental in school, and a smaller nmber effects on school quality. 2 whether parents and the f~ily detemi~nts , More generally, little is kon and about the of the value of a year of school.4 Our second re=on education there is little evidence on influence the rate of return to education in the labor market. 3 experience However, have ex-ined for being interested slopes is as a source of fmily in family determinants differences of in the demand for 1. For ~x~ple, all Of the studies smeyed in Griliches (lg~g) ass~e that the rate of return to education is the same for all individuals. 2. See siebe~t (1985) for a disc~~iOn ‘f this literature and detailed references. 3. we di~c~~ a parallel study b; AltOn.1i (1988) below. Hauser (1973) finds 1ittle evidence”-that father’ ~ o~cupati~n has much ef feet on the return to education for men in a cross section analysis that permits the education slope and intercept to va~ with father’s occupation. Using the Kal=azoo twins &ta, Olneck (Chapter 6 in Jencks et al. , WhO Gets Ahead?) finds little evidence that education slopes differ by IQ or by father’s education. 4 Altonj i (1988) and Morgan and Sirageldin (1968) are examples of studies that examine the relationship between school variables and future earnings and provide references to a small nmber of other studies. There is a large literature on race and sex differences in the rates of return to education. (See Cain (1986) and Welch (1973) .) However, Welch (1973) and a recent paper by Card and Krueger (1990) are mong a handful of studies that have looked at the effects” of schooling inputs on the returns to education. Card and Krueger find substantial eff ic~ of student/teacher ratio, the relative sala~ of teachers, and the length of the school tem on est~tes of the rates of return to education. They rely O? variation across states and age cOhOrts in th+se input measures and dO nOt cOntrOl fOr differences in parental inputs. TO the extent that differences in the average education of parents rabes the demand for school quality in a state and has a positive direct effect on rates of return to education, their results my overstate the effects of school inputs on the return to education. On the other hand, we find little evidence below of a substantial effect of parental education on the return to education. 144 education. In our &b matched fmily set the correlations of education members are .46 fo~ fathers and sons, levels between .43 for. mothers and. sons, .40 for’ fathers and daughters , .41 for mothers and tiughters, brothers, .58 for .5.0for sisters , and .ha far brothers and sisters. educational attaiment take the view that family background primarily by influencing the amount of education the rate “of.return to education constant. Most studies of affects education individuals obtain, holding However, education such as Willis and Rosen (1979) imply that family ba:kggound choice models characters that raise the rate of return to schooling may induce individuals school longer. of education members to .stay in Perhaps the strong parental and sib.1ing correlat io~ . arises in part because there is a correlation tics in years across family in the economic value of education. In this chapter we take advantage of the NV. data on .sibl ing pairs to esttiate a simple model which measures parental effects Oh the ‘education and experience slopes of children. log wage is specified control variables. co depend upon education, relationship between years of education and the Wage. family characteristics of education Since education education as well are likely to that have an independent that omitted will bias estimates of the return to education. 145 .. of the effect “of”IQ on the influence on wages, there” is a strong possibility variables to and mother’s that predicC years as the interaction between education and parent’s depend upon unobsened and a set of variables , school characteristics , and personal characteristics We also examine the interaction in which the coefficients including father?s edu=tion and an index of faily. background completed. and experienc&, We al”low the education and experience depend upon on other variables, education, Cons ider a standard wage equation family We deal with this by using a sibling fixed effect -to control for unobsened co=on to siblings. idios~cratic song that are for the family does not eliminate Of course, controlling differences variables siblings in cognitive ability and motivational factors which have an independent effect on both wages and education. In most of our ,specifications, we control for a measure of IQ to reduce the possibility mat the estimated ability differerices betieen siblings will lead to biases returns. 5 in ~ur hOpe is that most of the remaining b i~s is absorbed by the estimate of the main effect of education on wages rather than by the estimates of the extent to which background variables estimates of education. shift the Below we analyze the potential biases using a simple model of wages and the demand for education. Our main result is that the effect of the child’s IQ, father, s education, mother’s education, characteristics, and index of family background, and persoml characters seconda~ tics that predict years of schooling completed have only weak influences on the relationship wages, and between the f-ily labor market ~perience background statistically background me fraework between education and In a ntiber of cases , direction In view of the results, that the effect of family background responsible and wages. interactions work in the ~ong insignificant. school on the education for more than a small part of the powerful or are it seems unlikely to us slope of wages is effect of f~ily on years of school completed. paper is organized as follows. for the study. III presents Section I presents Data issues are addressed the econometric in section II. the empirical results, and in section IV we smarize Section the 5. me b~ic aPPriach “as implemen-ted in Altonj i (1988) Using a small s=ple for the Panel Study of Income D~amics, without a control for IQ. His results are discussed below. 146 _ findings and offer some suggestions for future research. I - tiononetric Raework . Cons ider the following log wage equation for ..a ~youn”g woman: ,,= (1) Wdht - ZdhtB1 +_ 2fiB2 + ZfiB3. + is the log wage, and Z& In (1) W&e and father, respectively. bbor market experience. characteristics convenience, education, tem The variable EDdht is education, rates. is uncorrelated The education and experience characters For expository ‘dht ~d and “~h are indivi~l is a transitory fomal seconda~ schooling process error with the other right hand side tics that are related to innate c.ognitive ~ ility, primaq and secOn&~ school qulity, the amount of ttie and energy that children devote “to schooling and in slopes rdh and rdh dep-end On family quality of early childhood development, prima~ and a cubic specification Finally, specific error components; in the eqwtion. is in most of our empirical work we include an and a quadratic in experience. variables and ~Pdht of the educacion between education and experience, that we asswe tics Of the mother The vector Zdht consists of other obsened However, component +. Cd + Sh + .*E and Zfi are characters we work with a linear specification specific and faily background + r&HPdht of the woman that affect her wage experience profiles . interaction r&ED& school, and and as the success infomal 147 of parents as teachers at home. aides when .in in the Specifically, (2) rfi - alXfi + .2X& + r + Vh rdb -blxfh+bzxti+ where v and ~ h r+% are .nobsemed household specific error components rates of return to”education and experience. . One can eas ~ly generalize correlated. variables Vh and ~ may be (2) to include person specific such as IQ scores, and we do so in the empirical work below. variables Using (3) me affecting (2) to substitute for rdh and rdh in (1) leads to Wdhc - ‘dh=B~ + ZmhB2 + ZfiB3 ; + [r + alXfi + a2Xmh ]EDdh + [r + blXfi + b2X&]~p&t + cd + ~h + VhEDdh + Phmpdht + ‘dht Because EDti is likely to becorrelated least squres estimates . eliminate estfiation of the above eqution However, by dif ferencing with the error te~s will” lead to biased par~eter (3) for pairs of siblings one can the terms involving Ch from the equation. and d’ , the difference equation sh and Vh, For siblings indexed by d is (4) Wdh= ~ Wd,ht - [Zdht - Zd,ht]B1 +[r+a X lfb + a2xmh] [EDdh - EDd,h ] + [r + blXfi + bzxfil [~pdht + Sd - cd, + vh[ED& me - Wpd, htl - EDd,hl + ~[mpdht - ‘Pal, ht] + ‘dht - ud, ht error components Vh and ph are constant within the household 148 and so will be mcorrelated with the explamtory However, potent ial simultaneity cd, if these idiospcrat mitigate in the above eqwtion. problems could arise from the term cd ..- ic components capturing differences say, are cofielated to the differences In a nuber siblings d and d’ . variables in the education of the specifications in productivity, levels chosen by below, we try to this problem by adding a measure Of IQ to (3) , which implies that the difference between the IQ score: of d and d’ will appear in (4) . However: is almost certainly not a perfect control, and in the next few paragraph we a simplified whether our model of wages and the demand for education of the effects o“fparental education estimates to IQ we ex~ine on returns to education will be subj ect to bias. Suppose that experience ‘2 (2) is equal to zero, that there is no in equation slope, and theat Zdht is a constant without. much 10SS of generality, components. men for all siblings. suppose we ignore the trans ito~ AISO , wage (:4) reduces to (5) Wdh - Wd,h = [r + + alxfi] cd - cd, [ED& + - EDd,h] Vh[EDdh - EDd,hl Let the young woman’s demand for education be (6) ED&- c1+c2xfi+c3sd+c4 Vh+ud where Cl is a constant, C2 > 0, C3 .> 0, arid-C4 > 0. from a model in which individuals seek to”maximize value of lifetime income, and where the education 149 One can easily derive (6) the present discounted slope in the wage equation is related to Xfi, cd, Vh, and w ~, and the interest rate used to discount future income depends upon one or more of these variables and on the nuber of years of education chosen. Finally, asswe (5) separately for f-i.lies “with Xfi-o and X estimates limit of - EDd,hl , Cd ‘ Cd, + vh[EDdh ---------- (7) -r-+ -------.- VaY(C3 The probability (8) - EDd,hl r+ - limit of the estimator of r + al for the X=-l Var(C3 The differe-nce betieen 1 (8) and (7) is the probability I Xfi-l) limit of the OLS are independent (7) is an inconsistent argment of (5) and covariances of Xfi, then the difference from the two separate regressions on EDd,hl is ------------- ,----[Sd - Cd’ ] + [Ud - ‘d, ] I Xfi-l ) It follows that if the conditional variances me r + al. ._ - s~ple that one would obtain if one used the pooled s=ple families to estimate express iom [ Xfi-o) .-: ----------------------------------- al+ esttiacor of a The probability [cd- ,Sd,] + ‘@d - Od, 1 I ;fi-o) COV( [EDdh ‘ EDd,hl . :d - cd, + Vh[EDdh . -1. fh will be the estimator of r for the Xfi-O smple COV([ED& Suppose one that Xfi takes on only two values, O and 1. is a consistent in the coefficients estimator of- al even thou~ estimator of r and (8) is an inconsistent can easily be generalized in the above estimator to the case in which Xfi tak@~ a variety of values . In practice, our specifications include nonlinear 150 of education terns and other explanatory variables. interaction Some specifications include more than one term with education, and all of our models include a measure of experience, which was omitted from the above disc-s ion entirely. above analysis provides of al some basis for believing But the that the bias in the estimate ( the. itiluence of the father 8s characteristics on the daughter’s return to education) will be small even if the bias in the estimate of r is large. A Ftied Effect Approach In practice, (4) . it is not efficient to work with the di Eferenced equation Our panel data set provides more “than one obsination individuals in the sample. Fmthermore, for some househOl& ‘these circms tances a more efficient es timat ion approach eliminate Ch. ~is more than one and for others only one”””child.ti in the sample. sibling is in the saple, and include a separate Ori (3) for most In is to work with (3) intercept for each family- (a fixed effect) to permits us to use the time variation in experience for each individual to identify experience characteristics on the experience slope even in the case of individuals who do not have a sibling in the sample. the &ta on households a separate comtmt (9) effects ‘and the effects of parental It is also a convenient with more than two children. for each household Wdht - Wh - (Zdht - ~)B1 way to use all of Applying is equivalent to esttiating + + [r + alxfi + a2Xmhl (EDdh - EDh) + Vh(EDdh + [r + blXfi + b2Xmh] (EXPd +ed-; d+ OLS to (3) with ‘dht - \ 151 ht - EDh) - sxPh) + &( ExP&t - ExPh) where Zh are the averages of the characteristics of all the daughters household h, EDh is rhe average education lev@l and. mph market experience coqonent, and ~ the average -”EDh) drop out (ED& the interaction, of (9)“,but tk experience terns, including When we pool to study young men and brothers, data for young men and young women we permit all of the coefficients involving and education, except the interactions between Xfi and X& We also allow for separate intercepts with gender. In pooled case we are implicitly asswing characters the tens remain. We use the same” fraework experience labOr of the daughters in household h, id is the average daughter . component Of their wages. is the average idiospcratic When tits for only one” daughter from household h is available, involving in tics have the sme the effects enter differently tO varY for males and females. that mobse~ed comon f=ily ef feet on both young men and young women. If for males and females, then they will not be eliminated when we add a separate intercept for females to (9). 6 consequently, we are not sure how much emphasis to place on the fixed effecm results based on the pooled sample. 3. me me kta sample Chapter man’s 1. Data are based on the Young Men and Young Women cohorts of the NLS. selection me or woman’s criteria dependent reported and most variable wage of the variables in all for a given regressions year. Note are is the that discussed log an in of the young individual 6, In ~hapter 2 we find that tiere do exist gender differences in the ~ ihli~g,t “age factors on the wage effe-cts of parental wage factors and Of ,t rates of young” men and yotiri”g. women. 152 may contribute more than one obsenation parentil education suney or her saple. 7 to his The measures (DADED and MOMED ) are based on young men and young women, s reports, since the use of information provided by the parents themselves would limit the smple to only those young men and young women whose parents are found in the mature women and older men’s cohorts. &ta of Missing on IQ scores and on mother’s and’ father’s education poses a problem the study. men (31 percent of the sample for young men and IQ is missing, 30.5 percent for young women) we ade A1l of our equations if data on the that IQ score all variables involve IQ also are missing and include is zero that depend on IQ as zero. a day othewise. variable for young men, and 10. 9_for women) are handled in tbe same way. data on DADED are likely to be related to whether present that Missing (25.1 percent for young men, and 26.9 for women) and MOMED DADED for is one data for (13 .3 percent .Since miss ing the individual, s father was in the household while he or she was growing up, we feel that it is inappropriate to simply eliminate cases with missing dati from. the analysis. 8 In addition to IQ, DADED, and MOMED, we constructed educational atta”iment variable called ED.INDEX. EDINDEX is a measure of the deviation of a”child’s “expected” highest grade completed group’s mean expected highest grade completed. from his or her Ie was_ constructed predicted value from a regression Of the child’s. highest set of parental and school quality variables a predicted as the grade completed that predict education, perhaps influence the child’s potential wages. Specifically, on a and the parental 7 In fact. the averaze nmber of obse~ations uer vounc man is 4.66: See ~his ckpter’s Appendix fo; s~a~ statistics and 3.66 for young women. more detailed descriptions of the young men<s and women’s data sets. 8 As we note below, most of our results are robust to restricting the SamPle. tO individuals with nomissing &ta on IQ, DADED., MOMED, and EDINDH. 153 variables are race, encouragement educational parents’ to continue whether the natural present in the household education father was past present goal for child high school, for whether and at age and 14, indicators for the natural mother child was 14 years old, for whether when parental was the mother worked when child was 14 years old (young men were not asked this question) , and for whether there were two parents (including step - parents) me household when the child was 14 years old. normalized in the school. quality measures are a school quality index, student -teacher ratio, counsel lor -student ratio, mean teacher’s sala~, expenditure/pupil, average hours .of hOmewOrk/pup il, and indicators for private school, child, s subjects most liked and disliked, and curriculm vocational We re-code ). individual me type (college preparato~, indicators in the equation. equation used to compute EDINDEX was estbated young men and for young women. Or that are missing for a particular variables to zero and include missing variable regression comercial, separately For each group ED INDEX is normalized for to have a mean of zero. me hypothesis underlying influence how much education our use of EDINDW is that variables that individuals obtain also influence the. response of wages to a year of schooling. mere are too many variables that could be related to the quality of schooling to investigate each separately. Ve work with cubic specifications for.experience. We parametrize 1inear education term is the marginal for educa~ion and IQ and a quadratic the models so that the coefficient rate of return to education individual with 12 years of education. men interactions and any or all of IQ, DADED, MOMED, and EDIND~ are parametrized so that the coefficient 154 between are included, on education on the for an education the equations is the marginal rate of return to etiation 100, the saple for an inditiidual w~th 12 years of education, an IQ of mean of EDINDSX (which is zero) , and a mother and father *O each have 12 years of education. 9 Although not show effects include dmy in the tables, all equations without variables child, s race, residence for the year for which the wage is reported, in an SMSA, res ihnce in the South, two parents “in the household when the child was age 14, in addition to nmber experience (more precisely, potential years since last euolled education family fixed experience, of siblings, calculated as nmber in school) 10 and experience squared, interacted with his or her experience. 11 of and the child, s In the models with familY g. AI I specifiaions that” include interactions between education and any or all of IQ”,”DADED, MOMED, or ED INDEX also include interactions between education and the corresponding miss ing dwy variable(s) . ~~ to (age -- 14.) 10. In ~reating” the experience variable we set experience for those who never enrolled in school or had zero years of schooling. We set Unfortunately, we did it to age minus the school leaving age for other cases. not.notice until after the paper was essentially completed that the school leaving age is incons istent with the &ta an age and/Or the years of schooling in a few cases. As a result, (age - experience) is less than 14 years for 1..0 percent of ~he young men, s ob.senat ions and 2.6 percent o.f the young women’s obsemations . This explains the fact that the difference G T“able Al betieen the maximm of age and the maximm of experience is 11 years for men and 8 years for women. When we eltitiate these obsenations and re-esttiate the young men’s wage equation with fixed effects (Table 5, colmn 1) , the effect of the first year of experience for an individual with 12 years of education falls from 2.65 to 2.59. The effect of education” for an individual with 1.2years falls = from 3“.27 to 3.08. For young women the effect of the first year Of experience falls from .634 to .544 and effect of education falls-”from ? .48 to 7.19 (Table 7, colwn 1) .” We re-estimated all of the models reported in the tables and found that in all cases the interactions of &ther’s education, mother’s education, EDINDEX, and IQ with education and with experience are not dr~atic~y different from those reported in the tables. 11. In the models ~ f.tiily fixed effects, face =d nwber of siblings are excluded from the contro 1 variables since they should be constant within the faily, and therefore their effects are captured by the family fixed effeet. For consistency when we work with the young pen !s data set, we replace each. young man’s reports of DADED and MOMED in the interaction terms with the average of the reports. of”all the brothers in the family. Similar 155 fixed effects , those individuals who do not tive siblings in the smple to identify the effects of experience, III. In section mother’s III. 1 we discuss of education. Resul- the effects education on the education slope. determinants various the year, and the residence variables. Esttiation cons ider the effects on the education help of father’s education and In sections 111.2 and 111.3 we slope of IQ and of the index of In section III. k we discuss the effects of the interact ion terns on the experience slopes of young men and young women. III. 1 me Effects of Father fs and Motherts Ed”cation on the Education Table 1 presents a sec of wage equations effect included for each family. been multiplied for young men with a fixed All coefficients and stan&rd by 100 to make the tables easier to read. 12 basis for” assessing whether farnily background Slope errors have TO provide a has an important influence on education slopes , we first discuss the size of the effect of education wages for a typical individual with 12 years of education. On A base line recodings are done for the young. women Is data set, and the pooled &ta set when family fixed effects were added. Nearly 96 % of young men who have brothers supply a DADED report that differs by no more than one half year from the average report over all the brothers in the family. For mother’s education, the figure is 94%. For young women, the corresponding percentages are 93, and 93. Fi=lly, for the pooled sample of young men and young women, report within one half year of.. the average 83% of individuals have a DADED over all his or her siblings, 85 .% for”MOMED. reports, 12 Standard errors have not been corrected to account for the serial correlation across the for a given individwl. The standard errors for the equations without fixed effects also ignore correlation among the errors terns of members of the same family. 156 equation with all background. interaction effects “excluded is repOrted colmn 1 of the tible. the marginal on education is to be interpreted effect of education when education equals 12 years. estimated coefficient speciftiation cubic The coefficient in me is 3.41 with a standard error of ~ 801. 13 for IQ, the education coefficient as men we add a falls to “3.27 (c.olwn 2) In’coltin 4 we add the interaction between son’s education. small in magtitude education, beween The coefficient coefficient relative to the main effect of” an additional different from zero. education and the son’s education in colmn 5 has a (standard error) of .286 (.199>”’: This re”sult is consistent evidence is weak. &ta On all of DADED, MOMED, IQ, and EDINDN, allow for both parents’ interaction on the motherfs education interaction Both coefficients In an~fforr on men we 6 of Table 1) the coefficierit increases and the father’ s becomes are- imprecisely estimted, though. to get more pretiise estimates at the cost of possible bias from the omitted “fkily variables education (in colmn with the coefficient rises to .730 and is significant. interactions with a but the However, when we restrict the sample to individwls the mother, s education negative.. year of “The interaction modest effect Of ’”mother’s education on the return to education, nomissing and the is .039, which has the expected sign, but is and is not si~ificantly mother’s father’ s.. education that are correlated with the young man’ s and his parents’ education, we report -timates without faily fixed 13 .“ ~en fixea effects are included, we estimate the difference in 10g wages (tties 10.0.) “’associatedwith inc.r~s ing education from 10 years to 12, 14, and 16 to be 6.33, 14.10, and 23.25’”(respectively). For young women the corresponding estimates are 15.47, 30.18, and 41.87. men fixed effects irk excluded, “the estfiates are 8.82, 18.06, in”d 27.14 Fo”? “young men and 11.74, ‘-” 24.87, and 38.90” for young women. 157 ,., effec= in Table 2. The esttiate of the rate of return when only parents’ for (coltin 1) is 4.39, which is in the low range of education is controlled esti=tes from other studies that do not contain detailed controls variables. education (Recall that when f~ily coefficient The interaction be~een 3.41 ) . was fixed effects were controlled and the son’s education has a coefficient The interaction between mother’s coefficient father’s education of .074 with a stantird error of .080 with a stan&rd error of .036. men fall somewhat. imply that parental education has a small positive effect on the relationship and wages additional for young .034. we include both Taken together, -the results with and without family effects education fur, the education and son’s education has’ a interactions , both coefficients parents’ for f-ily men. bemeen A point estimate of .1 implies that 4 years of parent education raises the chfid’s rate of return by .4, which is modest relative to an overall return to education Of..4 or 5 percent. Results for Women Tables to Tables 3 and 1 =d 4 report wage 2 for young men. family, while Table 4 does not. equations Table for young 3 includes women that are comparable effects for each fixed The base line specifications in colmn each of the two tables indicates that the rate of return to education higher for young women than for=_yOung men, and actually 7.78 when we control for family effects are generally increases coefficients lower when we include fmily effects) . Altonj i (1988) reports a similar pattern using matched sisters from the Panel Study of Income DP~ics. The education fixed effects seem to indicate that unobsemed 158 is from 6.26 to (recall that for young men, the education and without 1 of fmily fixed data on slopes with variables that raise wages for young women” are associated while the opposite is tme desenes careful peculiar pattern positive for young men. investigation in future with fewer The as~et~ work. Associated years. of education, is surprising with and it is a in which the ef feet of IQ (level) actually changes from to negative when we control for fmily through 7 of.Tables 3 and 4) . Men effecrs” (compare colwns fixed effects are excluded, 2 the coeff~clen”t an IQ is similar for young men and young women, around O. 30.14 14. ~Or yOung men, the main effecC of IQ has a positive - and statistically significant effect’ on the log wage in nearly +11 specificatio~. When family fixed effects ar~ “’~ricluded ,“the coefficients on the linear, quadratic, and cubic terms fiply that the wages of individual in che 75th percentile of IQ scores- are 5 .“6% higher than individuals in the 25th percentile. When family fixed ~feccs are excluded, the corresponding differential is 5.5 %. For young women we obtain a differential of .5.2 % when ftiily fixed effects ‘“areexcluded. However, when we add family fixed effects we obtain a negative IQ differential equal to 5.9 %. We do no have a full explanation for this puzzlirig result, although it aPPears tO be due in part tO an anOmaly in the s=ple o f young women who have sisters. We re-estimated our equations without fixed effec~ On the sample of young women who have sisters in the sample, since this is the sample that identities the effect of IQ”once family ftied effects are added to the equation. In the basic specification in colun 2, the effect of IQ is .15 (not significantly different from zero) , which is well below value of .30 for the full samp”le. (In models with family fixed effects, the coefficient estimates are about equal in the -O samples .) We also reestimated the model on a sample that excludes those young women for whom IQ is missing and obtained a negative but statistically insignificant coefficien~ when fixed effects are included. Years of schooling, wage rates, and EDIND~ are systematically lower for young women for whom IQ is missing. However, the same pattern holds for young men as well. (Since the__lQ score was provided by the respondent s high school, it is not surprising that it is more likely to be missing for those who have fewer years of education. ) The correlation between IQ and highest grade completed, the time average Of the log wage rate, the time average of log hours worked per week (for those who are .50, .27, .05, and .L8 respectively worked positive hours) , and EDIND~ in the case of young men and .b4, .31, -..04, and .46 in the case of young women. Thus , the gender dif~erences in the raw correlations are small. ,. We also investigated the possibility that part of the return to IQ for young women comes through an effect on the earnings of potential spouses. When we substituted family income for the log” wage rate as the dependent variable in the model, we obtained positive IQ coeffi:iegts “(multiplied” by 100) between .01 and .31 when fixed effects” are included and a positive coefficient of about .400 without fixed effects. 159 The coefficient (in colmn on the interaction of daughter’s and father’s education 4 of Table 3) implies that a year of father’s education past high school increases the daughter’s education slope by .116 with a stan&rd of .187. The corresponding coefficient interaction tem with mother’s education has a These results of .547 with a standard error of .212 .15 substantially more powerful effect. of parental mother’s ) on the education slope for yomg for young men the corresponding error education (especially women than for youg estimates were .039 and .286. ) imply a the (Recall, men. In colmn 6 ““we” again see the mother’s education effect becomes stronger and the father’s weaker “hen they enter together. in the .,.eqwtionwith family fixed effects. However, both of the parents, education and negative colwns 4 and when family= fixed 5 in Table 4. effects fithough effec”ts included, the imprecision from drawing strong conclusions education slopes for women. obtains quantitatively age interaction dropped from terms become s=ll the analys.i~; see we prefer the estimates with fixed of the estimates shout the effects in that case preclude us of pirerital education o_n the It is also worth noting that Altonj i (1988) important effec- of pireriti”leducation on the education slopes for young men, but does not find much Of an effect for yomg women. In view of these mixed results , we cOnclu& much evidence that parental education has a strong effect on the return to young women. Effects of IQ on the E&cation Slope education for either young men 111.2 me A nwber is that we do not have or of the specifications include 15 an interaction of the child’s This esttiate rises to .820 when the smple is restricted individuals with nomissing data on IQ; DAD ED, MOMED, and EDINDN. 160 to --- . education tem with his or her IQ. is typically negative .010 for young men. between We are su~rised to find (and insi~ificant) When we add fixed effects, the coefficient benefit more (in percentage III. 3 The Effec- when fixed eff”ects =e of EDINDM on the E&utiOn IQ’s Slope and EDINDEX and cubic speci ficat ions of and IQ, a ftiily fixed ef feet, and the other standard controls for .The gain effect “of EDINDEX is large and positiye..(2.81) with a standard enor of .734, but insignif.icant.16 coefficient included. terns ) from additional years of schooling. 7 of Table 1 adds the interaction of education young men. is is -.085 and is highly the level of EDINDEX to the equation containing education coefficient Thus, .ye have. little evidence that those with higher significant. Colmn interaction the with a coefficient .of -.015 to For young women, the IQ interaction .000 and -.057 (and insignificant) chat the interaction When the family fixed ef fee- on the educatiOn-EDINDEX significantly tem different from zero. interaction is negative are excluded and (Table 2) , the is .083, but it is not (Without fiexd effects, the coefficient on EDINDEX falls from 2.81 to 1.23 with a stan&rd” error of .239) .17 For young women, we obtain EDIND8X interaction coefficient estimates (standard errors) of .086 ( 103) when family effecti are excluded (Table 4, 16 Omitting the education- EDINDEX interaction did not have much effect on the coefficients on EDINDN reported in colun 7 of the various tables. 17 Measurement error in reported education might be partially responsible for the positive coefficient on EDINDEX. The decline in the EDINDM coefficient. would be expected if the proportion of the variance in EDIND~ tbt is across families exceeds the corresponding proportion for education. It.might be possible to improve upon our estimates by using the education reports provided by relatives (e.g. , parents , brothers or sisters) as im trments for the education reports provided by the respondents. 161 colmn 7) . 7) and .310 (.310) when family effec~ are included The latter indicates that a 3 year difference associated with a difference of almost- 1 percentage However, rate of return to education. (Table 3, colwn in predicted education is point in the young woman’s the coefficient has a standard error of .310, arid is therefore not precisely estimated. In colmn 8 of Tables 1 and 2 we s-imultaneously include the titeractions of education with IQ, D~ED, young men. men IQ, and EDINDM excluded fixed effects are included interactions in the wage equations (Table 1) the parents’ are all ins i~if icant:= men (Table 2 ) the EDIND~ a standard interaction coefficient for education, ftied effects are increases to .240 with error of .087, while the parents I terns and the IQ interaction remain ins ignif icant. obsened MOMED, and EDI~~ The same general pattern of coefficient changes is in the young women’s models in Tables 3 and h. In s~ary, we do not have stron”g evidence that variables related to the nmber on the education of years Of education that are completed have much of an effect slope of wages, although the education- ED IND.U..interactio~ are typically positive and significant in the models that exclude fixed effects and i“iclude ill of the interaction found to have a strong positive terns. The of” EDIND~ level effect on wages, particularly was in the models including fixed effects . It is also interesting effect of education. excluded the education Table 1) . coefficient falh from (Table 2, col_* 3.78 to 3.27 when EDIND~ 2 and 7) . in the models with family fixed effects: Evidently, reduces the =in For example, for young men” when fixed effects are added as a control variable more dramatic to note that adding EDIND~ variables that are positively 1.62 is The drop is even from 3.27. to 2.16 (see related to educational . attaiment, wages. and are captured by EDINDW, direct effect on This ..isconsistent with evidence that the education upward by omitted variables alternative explanation once EDINDH is that measurement is controlled The Effects of IQ -d for. e=or faily .However, an in education, which would has more of an influence on the education slope (See footnote 17 for a further discussion. ) Paren&l Education on ~erience Table 5 reports estimates of the interactions between education, slope is biased that are correlated with education. 18 tend to lower its coefficient, 111.4 have a positive IQ, father’s eticat ion, and mother’s education fixed effe”cts”included in the equations. 19 Slopes experience and for young men with In colun 1, the effecc. of 18 Screeting models emphasize that education has value in the market because it reveals information about worker quality that is difficult for employers to obsene directly. Consequently, to the extent that the variables that are included in EDIND~ are hard for employers to obsene directly and are indicators of productivity, the decline in the education coefficient is consistent with signaling models that imply that t~e return to education is in part a return to worker characteristics that are correlated with -- but are not changed by- - sec On&ry and higher education. are e~ily However, to the extent that the variables comprising. EDIND~ obsemable, coefficient screening models would seem to -predict no decrease when EDIND= is added as a regressor. on” education in the It -y be possible to base a test of the screening model on the relative effects on wages of the component of education that can be predicted from information that employers obse~e and of the component of “education- that is unpredicbble. .Clearly, the problem in implementing such a test is uncertainty about what information employers actully can obseme. lg,. In all equations that we repOrt, we include an interaction between education and experience. (The size of the coefficients and associated standard errors of the other interaction terms are only slightly sensitive to the omission or addition of the education-experience interaction term. ) The coefficient on this variable is positive, large, and significant for young men- - around .120 with a standard deviation of .030 -- indicating that 4 more years of education raises the linear term. in the experience slope by .36 to .51, which is large given that the linear tem in the experience slope for an individul with 12 years of education is 3.27 when family fixed effects are included. However, we do not find these effects for young women: though the estimated coefficients are all negative, none are significant ~see Tables 7 and 8). 163 one additional experience, year of experience 12 years for an of education, individual a father education, and an IQ of 100 is 2.61. experience in colmn with and mother no previous each with The interaction between 2 has a coefficient Father’s education has a small negative and statistically interaction with experience and is not very sensitive experience and IQ (see coluns also small, negative, effects” (se”ecoluns %en .019. ‘. However, one controls and between The mother *s interaction for family fixed effects rises to interaction the coefficient mo ther’s education insignificant to whether and mother, s education 3, 5 and 6) slope by .34.20 term is 4, 5 and 6) . coefficient father’s education IQ and and ins ignif i~ant in the models with family fixed we do nor control interaction .029 (Table 6) the IQ with a standard error of .005, and the term rises to .028 with a standard error of on the interaction between experience and remains negative and insignificant. Tables 7 and 8 report a parallel Set of results for young women. coefficients statistically Similarly, on the IQ-experience The and ins ignif icant whether or not family fixed effects are included. insignificant In swag, on interaction are small in ma~itude the f“ather’s and mo ther’s education statistically of (standard error) of .017 (.005) , implying that a 20 point increase in IQ raises the experience for the interactions between ~perience 12. years the experience interaction terns are and small in magnitude. we do not find a strong positive effect of parental slopes. in some cases , negative. — In most cases, the point estimates Evidently, the relationship betieen education are small, and parental _. ... 20 In our Smple of young men the 25th and 75th percentiles of the IQ measure are 92 and 112 while. the mean is 101.6 and the standard deviation is 15. g. For young women, the corresponding figures are 93, 112, 102.2 and 15.2. 164 education market h~an and is not capital experience general strong and highly educated educated consistent or her and enough, slope. men, it is slopes relationship while between possibility individual return that sli~tly the we~ IQ has the child’s the a small is steeper between lack education general the fla,tter for more with 0~ only slope labor between to .influence relationship is co=istent link the ef feet for more highly parental of a strong, and ability and his slope. be kept that of the the experience IV. Discwsion It should to entering training, to note (if anything) Consequently, prior the strength in on- the -job Also, experience experience given obtiined It is interesting “omen. 21 education capital investment slope. on the experience hman in mind family characters to education. that and these characteristics, COncl~iOn results school do not mle characteristics, out the and tics that affect expected schooling alter the ~ men the effect of education on wages is nonlinear, the 21. %en we pool the vounc men’s and vounc women’s samDles and add .. fixed effec~s we fin; th;t the exper~enc~ s“lope is” more than 3 points lower for fe“rnales than males. It should be kept in mind that our experience measure is a measure of potential experience sdsequent to completion of school ing, which may partially explain the smaller coefficient for females, We also find &at coefficients on the interaction between education and experience is typically .085, iugge$ti+g a substantial effect of education on the experience slope. This qualitative result and the empirical magnitude is consistent with most of the evidence of which we are aware. The IQ. experience interaction has a coefficient of .013 (with a s tanda?d error of .004) when we use the pooled sample and include family effects, indicating that. a 10 PO int increase in IQ will raise the experience slope by me estimate i* .021 with a stan&rd error of .004 when between .05 and .08. family effects are” ekci~did. ” Finally, the coefficients on the experience -father’. s education, and experience -motherl s education interactions , which are a main focus of our are small in magnitude and never statistically significant when we analysis, pool the young yen’s and young women, s &ta. fmily 165 .. ex ante return must take account of the fact that educational uncertain. Variables outcomes are that affect years of schooling may raise the ~ return even if they have nO effe”ct or a small negative effect on the response . TO see this, note that if of wages to a given nmber of years of schooling. most of the return to college is associated with graduation, then variables that lower the value of a college degree but increase the prob~ility grad-tion conditional of on starting college may raise the ex ante rate .of return to starting college. 22 A simple way to investigate which do not include education the interaction these issues is to estimate wage equations squared and cubed as _regressOrs. terms should “get credit” for differences return to education associated with different education In this case, in the average Tables 9 and levels. 10 report the results of wage regressions which included linear specifications of education. The results are basically similar to the estimates — above. 23 In this paper we have explored the possibility experience and an discussed that education slopes of wage equations are influencedby index of family background personal characteristics variables, IQ, parental school characters that predict years of education and education, tics , and completed. result is that the effect of the child?s IQ, father, s education, Our main motherts — 22. See “ei~b”rOd (lg62) for the initial discussion Of this distinction and Altonj i (1989) for an empirical analysis of ex ante rates of return using kta from the High School Class of 1972. He finds that favorable fmily backgrowd and individual characteristics raise the ex an te rate of return to starting college even though his methodology asswes that wage response to education is the sae for all individuals. 23 ~ese results are OnIY suggestive, since variables that have Only small effects on average returns may have large effects on margi=l _retuns. TO address these issues, it would be necessa~ to adopt the methodology of AltOnji (1989) , which is beyond the scope of this paper. 166 .- education, and index of faily and personal characteristics background, between education labor market ‘experience and wages. background school characteristics, that predict years of schooling completed have only weak influences on the relationship between seconda~ In a nmber and wages , and of ‘cases, the f-ily interactions work in the wrong direction or are statistically insignificant; In view of the results, it seems unlikely effect” of f-ily hackgiound to us that the on the etication slope of wages i.s.Eespons ible for more than a small pafi of the powerful affect of family background on years of school completed. A substantial in a nmber estimates research agenda remains. .ofcases, when f~ily particularly are imprecise. First, we wish to emphasize Furthermore, that fixed” effects ari included, our the findings for young men are at variance with results in Altonj i (1988) using a sample of young men from the PSID. We plan to replicate our analysis using tbe most recent data from the PSID, which contains large saples of siblings. and Krueger suggest that educatioml education slopes. evidence inputs can have large effects On and peer characters in measured educational that parental characters relationship recent results of Card On the other hand, the literature of ,schoo ling achievement suggests that fatily” background important variables me tics are the most achievement. tics in particular There k strong have “a strong to the level of earnings and to the titiber of years. of schooling. It remains to be the seen whether and experience they have a substantial slopes in wage eqtitions , 167 ef Feet on education Tale me 1 Effects of IQ and Parental Education on Wage hvels tid Education Slopes Depen&nt V.ri*le: bg -al Houly Yomg Uage (1967 Mllzs) Men Eqmtions wifi Faily Fixed Effectsl (Coefficients and Standard Errors Have Been Multiplied Explanatog Variables Educationz (based on a cub i.c specification) (2) “3..41 (.801) 3.27 (.834) .117 (.028) Education x Experience -- -- Education x DmED2 . . .=. .. Education x EDIND~ -- -- .-. ..269(.115) “.3.15 (.132) -- -- -- .010 (.040) -.180 (.187) .- -.216. (.189) .438 .286 (.199). (.229) -- .406 (.232) -- -.367 (.238) -.355 ( .265) .226 (.116) .255” (.116) ..226 (.133) -- 2.81 (.734) 2.75 (:754) -- -- .“277 .216 (..115) ( 116) -- -. 1.84 (1.26) .121 (.028) -- --- 2.16 (.889) .117 (.028) -- -- 3.8b (S.12) (8) .120 (.028) .119. (.028) .039 (.164) Education x MOMED2 IQ3 (based on. a cubic specification) .4.b3 (1.03) “.118 (.028) .000 (.040) ,(7) (5).. . (6) 2.27 2.69 (.990). (1.08) .117 .117 (.0.28) (.028) -- Education x IQ (4). (3) (1) by 100) -- EDIND=4 NOTES : 1. In addition to the variables reported, all regressions contain the following control v=riable$: Y... d.~i.s, .xPeri.nc E (de fin.d as the number of yeacs since Last enrolled in school) . experience squared, and indi. at.zs for reside”.. i“ an SMSA a“d i“ the sou Lh, two parents in the household when child w.* 14 year= old, a“d indicators representing missing variable report% the 2. Education i. d-fined .S hishest grade oompleted min”n 12. =. its coefficient i= read .s the additional wage ao. zuing to a yeas of education past high school. DADED is :he average report ovex all brotbers in the f~ily, rather than the Individual youns man, $ report, of father$s .ducasion mtius 12; moth* z,* education (MOMED) ia constructed similarly. 3. IQ is defined a% tha 4. EDINDEX is an index of education. 5. The typical individual, of paxe”tal .e&r.ssiom had s reported imflue”ce N- 19298, R2- IQ score a“d .74, school minus quality and ~SE- 168 100. .263. factor* “hich predict number of Y...s Table 2 me Depednt Effecti of IQ and Parental Educacion On Wage bvels and Education Slopes Vari~le: bg =1 Hourly Wage Men Yomg ExplamtO~ Variables (1967 Mllars) Eqmtions witiout F-ily Fixed .Effectsl (Coefficients and Standard Errors Have Been Multiplied by 100) (8) (2) (3) (4) (5) Educationz (based .-4.39 on a cubic specification) (.409) 3.78 (.415) 2.9.5 (.458) 3.94 (.450) 3.98 (.435) 3.21 4.02 (245.4) (.439) Education x Experience .172 (.032) .174 .173 .032)” (.032) .173 (.032) .174 ‘“.1.68 .17”1 (.”032) ““(:032) (.032) (1) .173 : -- (.032) (6) (7) . 2.68 (.4g6) Education x IQ .-..—...-- Education x DADED -- -- Education x MOMSD -- -- Education x SDIND~ -- -- -- .274 (.038) .334 (.044) .275. (.039) .272 “’ :“;273 ““:248 .319 (.039) (.039.) (.03”9J (.044) DADED2 -.256 (.108) -.285 (.108) -.267 (.108) -.335 (.123) -.3.1.2 -’:319 -.:346 (.109) ““C:”124) (.109) -:372 “-”-” ““ (..124) MOMED2 .607 (.118) ,553 (.118) .537 (.118) .535 (.118) .49”2 (.124) .“513 (.118) .421 (.126) -. -- =1 .23 (.239) .986 (.244) IQ3 (based on a cubic specification) .007 .013) -- -- .074 (.-034) ..- --- -- .050 (.037) .- .080 .064 (.036) ““(.040) -- ...... ------ .---- .>477 (.126) ----------- EDIND~4 -.015 (.013) --’ ”-- -- .054 (.037) ---= .064 ( .040> .(::;;)’- ~::;) NOTES: 1..._ 1“ additiont. the variablesreported,all tegres. ions contain the following control variable. : year du-ieo , experience (d. fined a. the number of years since last .Drolled in school) , experi.uce for rata, residence squared, number of sibling. . and indicators in an SMSA and i“ the South, two Parent. i“ the household when the child was 14 years old, and indicate, a rePrasentims missins variable rePo, ts . 2. Ed”cation is defined as highemt grade compl.t@d minus additional wage s.cruins to a y.ar of education past high ed.. ati.n (MO~D) father, = education (DADED) a“d ❑ other,% 3 ... IQ is defined 4, EDINDEX as the i. an index individual, .f parental s reported i“flue”ce IQ storm and 12.. so its coefficient ix x.ad .= the school. A similar interpretation holds .Oeffi. i.”ts. minus 100. school quality fact..% “hich predict n.~ex of yea=s of education. 5. The tYPiCal regression had N= 19298, R2- for .29, 169 and ~SE= .386. Table 3 me Effects of IQ and Parental Education On Wage hveb and Ed=tion Slopes kpenknt VSi&le: hg - Houly YOug Wage (1967 Dollars) Women Equations wifi F=ily Fixed Effectsl (Coefficients and Standard Emor: Have Been Mul~iplied Expla-tO~ Variables Education2 (based on a cubic spectiication) Education x Experience (1) (2) 7.78 7.48 (.9.62) (.g74) -.o&9 (.043) -.047 (.043) Education x IQ -- Education x DmED2 -- (5) ““”””(”3) (4) 6.58 7.00 9.44 8.57 (1.13) (1.13) (1.15) (1.22) -.045 (.043) -. (6) (7) (8). 6.53 (1-37) 6..78 (1-01) -.047 (.043) -- -- -—. .116 (.187) -- -7099 (.200) -- -.057 (.050) (.046) ..--—-,.= —-- -- -- Education x MOMED2 -- Education x EDINDH IQ3 (based on a cubic specification) -. .=..,-- -- -. 2a4 _- ,-- (.132) -.276 (.146) -- -- -- .5.47 (.212) -.29a (.133) -.331 “(.133) —----- --- = ---- lM (.205) -.. .711 (.234) .310 (.310) .480 (.344) -.316 (.132) - .2a8 (.146) 2771 (.a20) 2.97 (.a32) .633 (.226) -- -,336 (.133) .—. EDIND~G ._ -.044 (.043) -.047 -.046 (.043). (.043) -.046 (.043) ..- . 000 by 100) . NOTES: 1. In addition to the variables r.port.d, all r.sre%sioms contain the followins control variables: y.. r d“mi.. , experience (defined . . the number of years .ince last .nrolled in .chool). .Xp. rienc. for r.. ide”.. i“ an SMSA and 1“ &he South. sw.r.d, and indicator two Parents in the household when old, and indicators representing missim~ variable reports. child was 14 years 2. Education ia defined as highest gzade completed minus 12, so its coefficient is re=d as the additional wase accruing to a yea, of education past high school. DADED is the average zep.rt over .ather than the individual young Woman- s report, .f father, s .duca Li.n minus sister, in the family, (MOMED) i. constructed simila.ly. mother, . education 3. 4. of 5. IQ is defined ED INDEX as the is an index Individual,. of parental reported i“flu.n.. IQ *core and school minus resxession had N- 14320, R2- .72, quality and WSE= 170 all 12; 100. education. The typical the .283. factors “hich predict numbex of yea=. Table 4 me Wpen&nt Effects of IQ ad Parentil Education on Wage kvels and Education Slopes V~i*le: Lg Real HOUly Wage (1967 ~llars) Women YOwg Equations titiout F-ily Fixed Effectsl (Coefficients-”fid Standard Errors Have Been Multiplied ExplanatO~ Variables (l). (3) (2) (4) (5) (6) by 100) (7) (8) Educationz (based on a cubic specification) 6.26 (.502) 5.78 ““”5.04 (.503) (.551) 5.1.5 (.537) -“5.04 5.37 (.541) (.523) 5.14 (.520j 3.73 (.594) Education x Experience -,002 (.043) -.022 (.042) -.015 (.042) -.023 (.042) -.021 (.042) .-.021 (.042) -.030 (.042) -.025 (.042) -.085 (.015) -- -. -- -.089.. (.016) -- -.072 (.047) -- Education x IQ -- .,. —-- Education x DADED -- .- -.119 (.042) Education x MOMED -- .- -- -- -- -.. -- . . .296 (.042) ....398 (.045) ..302”.: .300 (.042) (.042) .303 .042) “.259 .368 (.’043) (.045) ..007 -“.139 (.122”) (.122) -.137 (.122) .049 (.134) -“”. 100 (.123) .028 .135) -.212 (.122) .“307 (.137) .“290 (.136) .258 (.137) .344 (.139) Education x EDIND~ IQ3 (based on a cubic specification) DADED2 .- .“260 (.136) .- -- -- ~~~-.081 (.044) -.027 (.049) ._ ----- . . —-. --- -.107 (.047) ..__, .-,. ED.INDm4 .086 (.103) -.023 .(..050) .379 (.111) -.io4 (.135) .316 “ .187 ““- .259 (.”141] (.137) (.141) ----- 1.64 (.283) 1.54 (.283) NOTES : 1. In addition to the variables reported, all regressions contain the fo.llowi”g control variables: dumie$ , experience (defined as the nmber of yea.. since last enrolled in school) , exp. rie”c. squared, “umber of siblings , and indicators for race, residence i“ an SmA a“d in the south, two parents in the household when the child was 14 years old, and indicators representing ❑issing variable .ep. rtx. Y.ar 2. Education is defined as hishemt grad- completed minus sdditi.nal was. ac. ruimg to a year of education past hish father, , education (DADED) and ❑others s education [MO~D) 3. lQ is defined . . the 4, EDINDEX is an index of education. 5. The typical individual, of parental regie$,ion s reported influence “hod N- 14320, IQ s.ora a“d school R2- .24, 171 12, . . its coefficient is resd as the school. A similar interpretation holds .Oafficiants. minus 100. quality a“d for factors WSE- .376. which predict ““mber .f yea. % Table 5 me Dep-&nt Effects of IQ =d on Wage hvels =d Variable: bg Parental Education ~erience Slopes Real Houly Yomg (1967 ~ll=s) Men Eqmtions with F=ily Ftxed EffectsT (Coefficients and Standard Errors Have Been Multiplied by 100) ExplanatO~ Variables (1) Educati0n2 (based On a cubic specificat%oti) (Experience)z (4) (3) (2) (5) (6) :. Experiences “ Education x Experience ‘3.31 3.49 (.8L1) (.840) 3.21 (.841) 2.65 (.299) 2.66 “2.6k (.308) (.305) 2.61 2.61. .2.62 (.304) (....307)(.314) -.071” (.010) -.0.70 (:010) -.072 (.010) -.072 -.071 (.010). (.910) .117 (.028) .091 (.031) .123 (.030) .Ufi (.030) -- .017 (.005) -- -- -- .- -.034 -- Experience ~~ ( .020) -- Experience x MOMED2 ------- .269,_ .136 (.115) (.121) IQ4 (based on a cub ic specification) 3.27 3.44 (..843) (.847) 3.27 (.834) Experience x IQ x DADED2 Uage .272 (.115) .127 .105 (.031). (.033) -- ==-. 028 (.022) . .-.023 (.021) .272 (.li5) -.071 (.Q1O) -.013(.024) .018 (.005) -.033 (.023) .-.019 (.024) .273 .135 (.115 ).. (.121”) NOTES : 1. -In addition t. the variables reported, .11 regxessio”s contain the following c.”trol variables: year dumies, and indicators for residence i“ an SMSA and in tha South, two par~mts in th. hOusehOLd when the =hild w.. 1~ years O1d. and indicators x*Pr*samting mis. i”g va. iable reports. 2. Education is de fimad as highest grade comF1eted mi””s 12, so it= c.efficient ix read as the addit50na1 wage accr”im6 to a year of education pa%t high school. DADED is the averase report over all brothers in the family, rathar than the individual young man, . report, of father, . education minus 12; mother> s education [MOMED) is c.n=tructed similarlY. 3.— Experience is measured enrolled in school. b, IQ is definad 5. The typical as the regression as pobontial imdivid”al, had expesien. s reported N = 19298, R2 = e, that IQ score is , “umber. of years minus .74, and WSE 172 100. = .263. since last — Table 6 The Effects of IQ md Parental Education On Wage tivels =d ~erience SlopDepen&nt V~iable: bg E- Howly Yowg Wage (1967 Dollars) Men Equations without Family Fixed Effects 1 (Coefficients and Stantird Errors Have Been Multiplied by 100) ExplanatO~ Variables (1) (2) (3) (4) 3.78 (.415) 4.27 (.428) 3.96 (.423) 3.7a ( .423) 3.a9 4.28 (.“4”26) (.435) 1.35. (,260) 1.4a (.26a) 1.49. (.267) 1.35 (.264) L.45 .1.51 ( .“26a) (.274) .002 (.012) .002 (.012) .003 (.012) .003”” ‘-”.00L “(.0”12) (.012) .172 (.032) .110 (.035) .152 (.033) .173 (.033) Experience x IQ -- .029 (.005) -- -- .- Experience x DADED ----- - .02a (.019) -- .047 (.021) .035 .021) Experience x MOMED ...- “-..026 (.020) -.049.. (=:022j .056 .022) Educationz (based on a cubic . .. :. specification) Experience (Experience)z . Education x E~erience --- IQ4 (based on a cub ic specif icat ion) .274 .(.03a) .039 (.osa) .277 (.03a) DADED2 -.285 .“”-.2?4 (.lea) (.lea) --.4aa (.193) MOMED2 .553 (.118) .552. .sic (.118) (.118) .“”160 .11’0 (.034) (.036) .02a (.005) .“273 .275 (.03a) (.03aj .043 (.058) -.2a9. i“.67k “”- ..57a ‘(.109)- (.211) (.212) .a20 (.217) 1.02 (.235) 1. In addition to the variables reported, all regressions .Ontai” the f.llowins variables : Year du-ies, ““mber of siblings, and indicators for rata, roaide”ce 14 yea=. old, and in the South, two parents in the household when the chi Ld “as indicators Xepre=e”ting missing variable reports . 2. Ed.cation the additional interpretation l.oa (.235). IQ is defined The control in an SMSA .nd is defined a= highest grade completed minus 12, . . it= coefficient i. read wage accruing to a y.ar of education past high school. A =imilar holds for fatther, s education (DADED) and mother, s education (MOMEDl 3. Experience is measured enrolled i“ school. 5. “.003” (.012) — NOTES : 4. (6) (5) tyPical as the as potential. individual, regression had experience, s reported N - 19298, that IQ score R2 - is, number minus .29, 1.73 and of years 100. WSE - .384. since last .S Tale me Depen&nt 7 Effecti of IQ and Parental Education on Wage bvels md ~erience Slopes V~i~le: kg -1 Houly YOwg Wage (1967 ~llars) Women — Equations tifi Fmily Fixed Effectsl (Coefficients and Standard Errors Have Been Multiplied by 100) Explanatoq Variables (1) (2) (3) (4) (s) (6) 7.48 (.974) 7.31 (.986) 7.63 (.9S0) 7.60 (.9S3) 7.66 (.9S5) 7.47 (.993) Experience .634 (.410) .509 (.415) .726 (.415) .672 (.416) .715. . .5.9.3 (.418) (.422) (Experience)z .006 (.014) .006 (.014) .007 (.014) .006 ( :014) .007” (.014) .008 (.014) Education x Experience -.047 (.043) -.023 (.048) -.06.5 (.045) -.061 (.047) -.067 (.047) -.040 (.050) -- -- -- -. .?001 (.007) ..031 (.026) -- .023 .027 (.029). (.030) Educationz (based on a ctiic specification) Experience x IQ -- .--. 0.03 (..007) Experience X DADED2 -- ----- Experience x MOMED2 .. .. —-- -- .037 (.029) .021 (.033) .019. (.033) -.315 (.143) -.282” (.132) -..280 (.132) -.280 (.132) -.293 (..144) IQ& (based on a cub ic specification) NOTES: -.284 (.132) ..-. 1. In additi.nt. the variablesrep.rted,all res.assio”*contain v.riables: year d-i.. , a“d P.=.nk. in the household when missing variable report= indicators the child for “as the followins control re. id. ”.a in an SMSA and in the South, LWO rePresenti”s 14 year. old, and indicators 2. Education is defined a$ highest srade completed minus 12, s. its c.efficimme is read as the additional wage .ccruin& to a yea. of education past high school. DADED is the averase tePort over all brothers in the family, rathez than the individual young ❑a”, s repert, of father’s education minus 12; mother, . ed”cati.n (MOMED) is Qonstructad similarly. 3. Experience is maas”red anrolled in school. 4. 10 is defined 5. The typical as the regression as potential individual, had experience, s reported N = 14320, R2 - thae Iq minus is, nmber 100. .72, and MSE 174 - ,2s3, ot years since Lass ‘- T Tale 8 The Effects of IQ ad on Wage Wvels -d Depen&nt V=i*le: Paren-1 ~erience tig Wal Houly YOmK Education SIOpWage (1967 Mllars) Women Equations without F-ily Fixed Effectsl (coefficients and Standard Errors Have. Been Multiplied by 100) ExplanatO~ Variables (1) Educati0n2 (based on a cubic spec=ication) (2) (4) (3) 5..79 5.78 ‘(.503) (.521) 5.85 (.515) (5) (6) 5.87 5.89 (.523.) (.525) 5.87 (.536) Experience -.640 (.349) -.733 (.356) -.615-.588 (..355) (.354) 1.57g (.357) -.684 (.362) (Experience)2 .030 (.016) .030 (.016) .031 (.0”16) .030 (.016) .030 (.016) .0”30 (.016) Education x Experience -.022 (.042) -.021 (.046) -.029 (.044) -.032 (.045) -.034 “(.045) -- -- Experience xIQ -- Experience x DADED -- Experience ------- .012 -- .012 .(.006) (.007) -- .006 (.023) . :- -.004 (.02”6) -.009 (.027) ..- .029 (.026) .027 .024 (.”029) (.029j .298 (.042) MOMED x -.02”9 (.047) IQ& (based on a cub ic specification) .296 (:042) .175 (.074) .297 (.042) .297 (.042) DADED2 -.139 (.122) -.137 (.122) -.182 (.246) -.130 -.074 (.1.22) (.273) -.027 (.276) ---- MOMED2 .260 (.136) .?64 (.137) .255 (.137) -.036 “-- .03.1 (.283) (.312) .008 (.313) ..178 (.075) NOTES : 1. In addition to the variables raported, all .egresmions COntai” the following v.riabl.s: Y*.. dumies. n.tier of siblings, and indicators far ra.. , tesidence and in the South, two parents in the household when the child was 14 years old, indicators zepzese”timg missing variable reports 2. Education the additional interpretation is defined as hishest gzade completed wage accruing to a year of education holds f., father,. education (DADED) 3. Experience is meas”c.d enzolled in school. 4. IQ i= de finid 5. The tYPical aB the as potential regression had N - minus 12, so it. coefficient is read Past high school. A similar and mother,, education (MO~D) experience, imdi.vid. al, s zeport”ed 1&320, COnt. ol in an SMSA and that IQ score R2 = is, nmber minus .24. 175 and of years 100. WSE = ,377, =ince last as Table 9 The Effects of IQ -d Parental Education On Uage kvels and Education Slopes kpen&nt Vari*le: tig -al Houly YOmg Wage (1967 bllas) Men Equations with =near Specification of EducatiOnl (Coefficients and Standard Errors Have Been Multiplied by 100) Explanatory Variables Without Faily (1) (2) .With Family Fixed Effects Fixed Effects (4). :-(3) ““ (6) (5) (8) (7) Edmati0n2 (based on a linear specification) 3.86 (.295) 3.99 (.287) 3.97 (.284) 3.22 ( .321) 3.26 .670) 3.57 (.645) 2.95 3.66 (..605) (.566) Education x Experience .115 (.027) .163 .158.. (.027) (.027) .166 (.029) .108 .027) .111 (.027) .112 (.027) Education x IQ .001 ( .012.) ~.- -- .025 .038) --- -- .085 (.030) .. -. .219 -- Education x DADED3 . . . . .090 (.033) Education x EDI~H -- -- -- --. -- -- .082 (.158) .092 .249 .281 .277 (.03.8) (.038). (.039) DADED2 -.270 (.lo8j -.355. (.121) -.315 (.109) -.347 (.109.) .546” (.118) .538 (.118) .485 (.123) .514 (.118) 1.23 (.227) --——— ---ED INDm5 of control variables fixed with a family are Education, DADED, and MOMED read .- the additional waga 3. The ---: .408 (.157) (.050) .318 (.043) rather -- . . IQq (based on a cubic specification) 2. -- ( .134) Education x MOMEDS NOTES : 1. Fox a list specifications .110 (.028) used in each effect, Table regression, 4 for those .276 (.129) .313 .306 (.113). (.114) -.. --- .. -- -- -- -- -- ---.—— ---2.35 (.706) ‘---- see footnote without. 1 in Table 3 fox are defined .. highest grad. completed minu% 12, =. their ace. uing to a year of education past high school. .Patio”% with family fixed effects “.. the averaged bxothexs, than the individual young man, . corra=ponding, rmports. 4. 5. re”ports OC DADED the coefficient= amd IQ is defined as the individual- s reported Iq score minus 100. ED INDEX is a“ index of parental influence and school quality factons which predict number of education. 6. .384. The ty~ical zeEression without fixed effects had N= 192$8. R2- .29, and tiSE= Th. typical reE2ession with fixed effect. had N- 19298, R2- .74, and WSE= .263. 176 .260 (.115) of MO%D, of y.a.s --- TAle The Effects of IQ md On Wage hvels ad kpen&nt VariAle: hg 10 Parental Education Edu~tiOn Slopes Real Howly YOmg Women Equations with Ltie~ Specification of EducatiOnl (Coefficients and Standard Errors Have Been Multiplied by 100) Explanatory Variables Wi&Out F~ily (1) (2) E&cationz (based on a linear specification) 7.07 (.371) Education x Experience -.152 -.136 (.035”) “(.034) Education x IQ -.071 (.015) 6.49 (.355) -- Fixed Effects (4)” (3)’ .- -.064 (.039) Education x MOMED3 -- -- Education x EDIND~ -- -- (5) (6) 6.52” (.353) 5.46 (.398) 5.71 (.780) 5.J8 (.779) -.123”. (.035) -.062 (.038) -.051 (.043) ....-.050 ,“(. OLT) -- (8) (7) 6.85 C.753) 5.20 (.724) _.. . -. ...057... -(:”175) -- -- -- -- .337 ( . 19.2) -- --- -... .= ““-.O1O -...-- -.005 (.040) --- -. .229 (.067) IQb (based on a cubic specification) .382 (.045) DADED2 -.-121 “(. 122 ) .021 :133”) .121 .123”j MOMED2 .282 (.137) .261 .137) .139) .316 (.032) --- -- .312 (-042) .306 of control variable, with a family fixed .- are used in each effect, Table .259 (.043) -.214 (.122) .i84 --- -- ..= .227 (.198) .=.300 -.270 -.342 -.337 ( .145) ““-( :’13’2) (“.133) ( 132) -- -- -- -- -,- . -- -- :----- (.137) 1.53 (:276) EDINDH5 2. Education, D~ED, and MOMED are read as the additional wage Witi Family Fixed Effects (.044) Education x DADED3 NOTES: For a list 1. .p*cificatioms Wage (1967 ~llars) regression, 4 for those ‘- see footnote without. -“ -:.. ---.” ‘- 1 in Table 3 for da f.ined a. highest grade Completed minus 12, s. their to a y.ar of education past high school. “;:;:9).. the coefficients accruing The equation% with family fixed effects u%= Ehe averaged sixter, , rePorts tather than the individual yo”ns wom.n,~ c.rresp.”dimg reports 3. of DADED 12 and IQ is deti”ed as the individual, s reported IQ score ❑inus 100. influence and school quality factors which predict number EDINDEX is an index of parental education. of 6. The tYPical resrefi, ion without fixed effects had N- I&320, E2- .24, and RmE.376. Thm typical .egrnssion “ith fixed ef~..ts had N- 14320. R2= ,7*, ~n* ~SE= .z~~. 4. 5. 177 of MOMED, of year. Appendk Stizistics for tie Yoag Sv~ ~- Table Al &n’s md Yomg Women’s Dati Se= Yom Mm Wmm ----—------—————————- V~ihlel Std s-l. Size Me= ----------——-— m“ Dev —-—----— w —-------- s-la SW M*m size ———-—— D- 0. 65s L4320 LU20 ———-— & M= 0.432 -0.914 3.193 2.403 0.000 9948 14.839 46.000 158.000 19298 0.457 -0.883 5.188 12.958 1S=8 2.786 0.000 18.000 IQ Score 101.127 13304 15.4L2 50.000 158.000 FatherS s 9.709 14451 3.732 0.000 18.000 9.844 10462 3.855 0.000 18.000 10.143 16736 3.258 0.000 18.000 10.202 12758 3.176 0.000 18.000 29.057 19298 3.704 24.000 39.000 28.262 14320 3.307 Z&.000 37.000 9.085 18877 4.988 0.000 28.000 9.441 14303 4.500 2.000 29.000 0.219 19298 2.124 -6.164 4.957 0.182 1&320 1.766 -5.986 4.U3 3.317 19164 2.5s5 0.000 18.000 3.593 14264 2.628 0.000 16.000 0.832 19256 0,374 0.000 1.000 0.821 14319 0.383 0.000 1.000 0.421 0.000 1.000 0.292 14320 0.455 0.000 1.000 0.627 14314 0.49s 0.000 1.000 14314 0.449 0.000 1.000 1.109 Log Sourly w-e Utez Ei&hest Grade =.638 18.000 C~leted 102.3= Edu.ation Mother, s Educati~ Ue Y.=, of ~*zienoe3 m1ma4 Nher of Sfiuw= Tw P-ents b Eo.seh.ti at a. 14? Black? 0.230 Resid-ce 0.399 19297 0.490 0.000 1.000 0.700 19297 0.458 0.000 1.000 in So.ti? Ee.idmce i“ m? ------------------------------Notes : 1. Mis Sk values Y- mitted -. frm is ❑ea.ued 2. w%. 3. ~eri.n.. i. in ED1~~ me ptential sqle size is 19298 f.= y- mm, 14320 for 1967 &ll=s. m.asued - ,,ptential individuals never euolled 4. all ..I..htio”s. men. is ~ index of f~~ qerience,,. .. tie. in school ox.raporti”g zero ye~s batigromd v~i~les, sch~l P=.diet Years of education. 178 of yews since last -rolled of edacatim. ch~acteristi.z, e~eri~ce md i“ .*-1. e~als persmal =. For fiose ti”us 14 ye a.,. .b~a.tezistics tias Appendix Table ~ of Distribution of ObsenatiO~ S-V P.,.ent .~tiihut.d .bsenation*. me ~ere U. =ith.r =erasa md five or six obse~atio~; ntier .f .bsewatiom per y- 3764 brothen sets in *. average “her of obse~ations Youm Wmm4 s Data Set: ~er. are 14320 absematims from 1968 to 1982. ❑= is 4.66, mile men, s tit. set, incltii”s per brofier set (includiw prwid~ waen tirowh tie =de brothers , md siwlet-s twelve is fi- 3423, or 90.9 Prc=t, by 3907 individuals in tie Y.mg Fifty- three per. ent .f the y- Men’s md 21 p,. ent centributed s-n , 31, or 0.8 Percent, =ets of tie. 8.2 Percent, sets of two brothem me yomg ti Yowg obse~ations. singletqs, 1 set of far ) is 5.13, xe Medim 309, or brofiers and mode -. Wmen>s data set. s.-i”. the Period ..ntrib”ted one, two or ttie. obs emations; 31 ad 16 percent cmtitiutti six tb..a eleven or five obsematims; of .bse-ati..% per YOUW w is 3.66, ~ila tia mde is two Percent contributed either f.u obsenations, ~. aerage me, .bs e~ationz. ~ere ... 3571 sister sees b or 7.5 pr.mt, ~e sets of tw avezage nhez obsematims, the young waa,s of .bseHati-s a“d the ❑de data set, includiw 3269; or 91.5 percent, siwletim, sisters, 32. or 0.9 percent, sets of tire. sisters, and 1 sat of fo~ per =ist~ is tm set (ticLdtig .bse_tions. me -i- siwlemns 269, iister~. ) is 4.01, the median is four COntrib.tim of my ,i,ce, set is 19 obs .Hatims. Pooled Data Se&: ~ere are 33618 obsanations Prec.diw ~ere YOW ti the p~led men’s and yo~g are 8039 brother-sistet ad of obse~ati.ns as given i“ the sets in the pooled data set, i“cl.ding 5367, or 81.7 percent sinsleco”s. are 990 sets, .r 15,1 perce”c, of tw P.rcent, .f four .ibUnss. data set with tie distmb”tim wwen, s amries. @ibli.gs, 178 sets, . . 2.7 parcmt, 5 seti of six siblings. 179 nere of tire. siblings, 32 sets, .r 0.5 -- References ti Chapter 3 Altonj i, Joseph G. “The Effects of Fmily Background and School Characteristics on Education and Labor Market Outcomes. ” Mimeo, Northwestern University, December 1988. Altonj i, Soieph G. ‘Controlling for Personal Characteristics, School and when Estimating the Comunity Characters tics, and High School Curriculm 1989. Return to Education. “ Mimeo, NOrthwes tern University, Novmber Bound, John, Zvi Griliches, and BrOnT H. Hall. “wages, SchOOling and IQ of” Internat i~nal DO the F=ily Factors Differ?” Brothers and Sisters: Economic Review27 (FebW~ 1986) : JJ - 105. A Cain, Glen G. , !.~e E~OnOmi~ AmIyS is Of hbor Market Discrimination: Sumey, ” in O. Ashenfelter and R. Layard (e~. ) , Handbook of Labor Economics. hstertim: Elsevier Science Publishers, 1986. “Does School Quality Matter? Retu?ns to. Card, David, and Alan Krueger. E&cation and the Characteristics of Public Schools in the United States”.“ Mimeo, Princeton University, April 1990. “More on Brothers. ” in KinQrnetriC5: Chamberlain, Gaq and Zvi Griliches. DetemiD~nts of Socioeconomic Success within and between Families, edited bsterdam: North-Holland, 1.9.7J. by Paul Taubman. Griliches , Zvi, “Sibling Models and Data in Economics: Begimings of a Suney, “ Journal of Political Economv 87 (October 19J9) : S3J - S64. Griliches, Zvi, “Est&ating Problems. ” Econometrics the Returns to Schooling: Some Econometric 45 (January 19J7) : 1-.22... Hauser, Robert M. 1’ Socioeconomic .Background and Differential Returns to ~ e Imuacts of Education. “ In Does CO Ie e Matter? Hi~her Education, L.C. Solmon and P .J. Taubman, e&. New York: Academic Press, 19J3 . McElroy, Marjorie, “The Joint Determination Work: The Case of Young Men” JOU nal ~ 283-316. of Household Membership and Market conomics 3 (July 1985) : Morgan, Jmes and Ismail Sirageldin. “A Note on the Q=lity Dime= ion in Education. ” Journal of Political Economy 76 (September 1968) : 1069- 10JJ. Olneck, Michael R. “The Effed’ts of Education. “ Gecs Ahead ? Vew York: Basic _BOOks ,.1979. In C. Jencks, —. et al . m Siebert, U. Stanley, “Developments in the Economics of Huan LabOur Economics, London and New York: Longman, 1985. 180 Capi-1. “ In WeisbrOd, ~y0 Burton A. ‘r Education and Investment in Huan Capital. “ Supplement, 70 (October 1962) : .106- 123. Welsh, Finis. “Black-White Differences’ in Returns to Schooling. “ m ev -ew 63 (December 1973) : 893- 907. ~ Journal of ~erican Willis, Robert J. , and Shewin Rosen. “Education and Self - Selection. “ Journal ~ 87 (October 1979): S7- s36. 181
© Copyright 2026 Paperzz