Estimates of the Economic Returns to Schooling from a New Sample of Twins

TLDR

The study contrasts wages of identical twins with differing schooling levels using a new survey. The authors use the twin survey and multiple schooling measurements to compare wages and assess the impact of reporting error on estimated returns. Omitted ability does not inflate returns, but measurement error biases them downward; correcting for error shows a 12–16 % wage increase per additional year of schooling, higher than prior estimates. © 1994 American Economic Association.

Abstract

This paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels. Multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling. The data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward. Adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent, a higher estimate of the economic returns to schooling than has been previously found. Copyright 1994 by American Economic Association.