Working Paper No. 806

The Co-twin Methodology and Returns to Schooling – Testing a Critical Assumption

Published: August 24, 2009Pages: 37Keywords: Returns to Schooling; Twins;, Equal Ability AssumptionJEL-codes: I21; J24
Published version

The Co-twin Methodology and Returns to Schooling – Testing a Critical Assumption Örjan Sandewall, David Cesarini and Magnus Johannesson


Twins-based estimates of the return to schooling feature prominently in the labor economics literature. The validity of such estimates hinges critically on the assumption that within-pair variation in schooling is explained by factors which are unrelated to wage earning ability. This paper develops a framework for testing this assumption, and finds, using a unique dataset of monozygotic twins, strong evidence against it. Di¤erences in adolescent IQ test scores predict within-pair variation in educational attainment, and including IQ in the wage equation causes within-pair point estimates for the returns to schooling to decline significantly. Our results thus cast doubt on the validity of estimates derived from the co-twin literature. 

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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