Naslov
Decomposing the Effect of Childhood Environment on Earnings

Autori
Žilić, Ivan

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Izvornik
RSEP International Conferences on Social Issues and Economic Studies Conference e-book / Kaya, M. Veysel - Barcelona : Review of Socio-Economic Perspectives, 2017, 84-103

ISBN
978-605-307-788-6

Skup
RSEP International Conferences on Social Issues and Economic Studies

Mjesto i datum
Barcelona, Španjolska, 07.11.2017. - 10.11.2017

Vrsta sudjelovanja
Ostalo

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
childhood environment, adult earnings, PSID, decomposition methods

Sažetak
In this paper we contribute to the strain of literature on early childhood environment by analyzing the effect of different childhood conditions and environments on subsequent earnings. Using the Panel Study of Income Dynamics (PSID) we are able to link adult earnings with parental and family characteristics (for example, parental income, education and house value). Using family background variables we preform classification exercise via clustering algorithm and group individuals into two groups based on family background and childhood environment. Using these distinctive groups and decomposition methods we separate the total earnings gap on the explained part (composition effect: the effect of individual-level covariates) and the unexplained (structure effect: the return on the individual-level covariates). Results indicate that there are significant mean and quantile gaps between two groups and that the total gap is increasing in percentile difference. The explained effect is around 70 percent across the quantiles, which implies that 30 percent of differences in wages cannot be explained by individual characteristics but group membership, i.e. childhood environment. Furthermore, running a detailed decomposition, we conclude that single most important covariate is education as differences in education across the groups can explain approximately 50 percent of total difference and 80 percent of explained difference. These results, using a novel approach, corroborate conclusions regarding substantial influence of early childhood environment on earnings.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA