A HUMAN CAPITAL MODEL OF THE EFFECTS OF ABILITY AND FAMILY BACKGROUND ON OPTIMAL SCHOOLING LEVELS |
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| Authors: | TRACY L REGAN RONALD L OAXACA GALEN BURGHARDT |
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| Institution: | Regan:;Department of Economics, University of Miami, P.O. Box 248126, Coral Gables, FL 33124-6550. Phone (305) 284-5540, Fax (305) 284-2985, E-mail: Oaxaca:;IZA, Bonn, Germany and Department of Economics, University of Arizona, McClelland Hall #401, P.O. Box 210108, Tucson, AZ 85721-0108. Phone (520) 621-4135, Fax (520) 621-8450, E-mail: Burghardt:;Calyon Financial, 550 West Jackson Boulevard, Suite 500, Chicago, IL 60661. Phone (312) 762-1140, Fax (312) 762-1148, E-mail: |
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| Abstract: | This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1-yr full-time equivalent (FTE) work experience cohorts for 1985–1989. The estimated Mincerian "overtaking" cohort (the years of work experience at which individuals' observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of experience, yielding on average a rate of return of 10.3% and an average (optimal) 11.4 yr of schooling. ( JEL J24, J31, J22) |
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