Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/223721 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13279
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We estimate a dynamic model of schooling on two cohorts of the NLSY and find that, contrary to conventional wisdom, the effects of real (as opposed to relative) family income on education have practically vanished between the early 1980's and the early 2000's. After conditioning on a cognitive ability measure (AFQT), family background variables and unobserved heterogeneity (allowed to be correlated with observed characteristics), income effects vary substantially with age and have lost between 30% and 80% of their importance on age-specific grade progression probabilities. After conditioning on observed and unobserved characteristics, a $300,000 differential in family income generated more than 2 years of education in the early 1980's, but only one year in the early 2000's. Put differently, a $70,000 differential raised college participation by 10 percentage points in the early 1980's. In the early 2000's, a $330,000 income differential had the same impact. The effects of AFQT scores have lost about 50% of their magnitude but did not vanish. Over the same period, the relative importance of unobserved heterogeneity has expanded significantly, thereby pointing toward the emergence of a new form of educational selectivity reserving an increasing role to noncognitive abilities and/or preferences and a lesser role to cognitive ability and family income.
Subjects: 
inequality
education
family income
JEL: 
I2
J1
J3
Document Type: 
Working Paper

Files in This Item:
File
Size
647.05 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.