A Discordance Weighting Approach Estimating Occupational and Income Returns to Education

Abstract

Schooling differences between identical twins are often utilized as a natural experiment to estimate returns to education. Despite longstanding doubts about the truly random nature of within-Twin-pair schooling discordance, such discordance has not yet been understood comprehensively, in terms of diverse between-and within-family peer, academic, familial, social, and health exposures. Here, a predictive analysis using national U.S. midlife twin data shows that within-pair schooling differences are endogenous to a variety of childhood exposures. Using discordance propensities, returns to education under a true natural experiment are simulated. Results for midlife occupation and income reveal differences in estimated returns to education that are statistically insignificant, suggesting that twin-based estimates of causal effects are robust. Moreover, identical and fraternal twins show similar levels of discordance endogeneity and similar responses to propensity weighting, suggesting that the identical twins may not provide demonstrably better leverage in the causal identification of educational returns.