This paper uses data collected in 2000 to first estimate OLS and ordered probit models to measure correlation between family background and workers’ education. Then, human capital earnings functions are estimated to examine to what extent family background accounts for observed correlation...

The decision to take more education is complex, and is influenced by individual ability, financial constraints, family background, preferences, etc. Such factors, normally unobserved by the researcher, introduce endogeneity and heterogeneity problems into estimating the returns to education. In...