Academic Literature

Genes, education and labor market outcomes – What can genetic information teach us about the intergenerational transmission of economic inequality?

What can genetic information teach us about the intergenerational transmission of economic inequality? A new IZA Discussion Paper by Nicholas W. Papageorge (Johns Hopkins University & IZA) and Kevin Thom (New York University) uses molecular genetic data to better understand the economic returns to ability endowments over the life-cycle, and how they are influenced by economic circumstances during childhood.

The paper follows the cutting edge in behavioral genetics research, which has led to the discovery of robust associations between particular genetic markers and educational attainment. Many of these genetic variants are implicated in biological processes affecting fetal brain development. For further analysis, individual markers are summarized as an “index” or “polygenic score” variable for any individual for whom genetic data are available. This score can be interpreted as a measurement of one type of endowed genetic ability.

The polygenic score is computed for a sample of over 8,000 genetically European individuals from the Health and Retirement Study (HRS), which also contains detailed information on education and labor outcomes including employment, wages, occupation, retirement, and wealth.

The score is robustly associated with educational attainment at all margins – from high school completion to college graduation. Furthermore, the rich HRS data permit an examination of how the genetic endowments captured by this score interact with investments over the lifecycle, e.g. childhood socioeconomic status (SES), to produce human capital.

Childhood poverty and wasted human potential

The research shows that genetic endowments do indeed matter. People with higher polygenic scores (who possess more of the genetic markers associated with education) do better – not only in terms of schooling, but also in the labor market. An important caveat to the analysis is that simply regressing an outcome (e.g., wages) onto a measure of genetic ability does not produce a causal estimate. This issue of how to interpret estimates is discussed at length in the paper.

Next, the authors consider the role of childhood poverty and a surprising pattern emerges. To fix ideas, compare two individuals with the same polygenic score, but who grew up in different economic circumstances. Doing so reveals large differences in educational attainment (e.g. college completion). For the individual from a wealthier background, a higher polygenic score raises the likelihood of college. For the poorer individual, a higher score also raises the likelihood of college, but to a lesser degree. That is, for poorer children, high ability does not translate to high educational attainment in the same way it would for wealthier children. More bluntly, there appears to be a subset of high-ability kids who do not make it to college because they are born into poor families.

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Chosen excerpts by Job Market Monitor. Read the whole story at  Genes, education and labor market outcomes | IZA Newsroom

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