Wednesday, September 02, 2009

Twins as an economic model

I have been somewhat sceptical about the use of twins as an economic model for some time. Just because its a good biological model doesn't mean that it will work for social sciences. Here is a paper that confirms my prejudices:

Sandewall, Örjan , Cesarini, David & Johannesson, Magnus

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. Differences 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.


Mark McG said...

Thanks Kevin, very interesting. I've heard you mention this before. I hope this issue gets the attention it merits

Alan Fernihough said...

One for the journal club, definitely.