DP3354 Returns to Education: Evidence from UK Twins

Author(s): Dorothe Bonjour, Lynn Cherkas, Jonathan Haskel, Tim Spector
Publication Date: April 2002
Keyword(s): ability, bias, measurement error, returns to education, smoking, twins
JEL(s): I21, J24, J31
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3354

We use a new sample of UK female identical twins to estimate private economic returns to education. We report findings in three areas. First, we use identical twins, to control for family effects and genetic ability bias, and the education reported by the other twin to control for schooling measurement error. Our estimates suggest a return to schooling for UK females of about 7.7%. Second, we investigate within-twin pair ability differences by examining within-twin pair and between-family correlations of education with observable correlates of ability (including birthweight, ability tests and reading scores). Our findings suggest lower ability bias in within-twin pair regressions than pooled regressions. Third, using data on twins smoking we show smoking reflects family background and using it as an instrument exacerbates ability bias.