Research Seminar "Genetics and Lifetime Earnings: Understanding the Mechanisms" (Eric French)

Genetics and Lifetime Earnings: Understanding the Mechanisms

Professor Eric French (University of Cambridge)

Wednesday, 6 November  2024 at 11.00-12.00  Zoom

This paper examines the mechanisms linking genetic factors to lifetime earnings using data from a British cohort followed from birth to retirement. We develop and estimate a life-cycle model that integrates childhood skill formation with sequential schooling and occupational choices in adulthood. The model accounts for two types of genetic channels: mechanical (via skill formation and earnings equations) and behavioral (via parental investments, schooling, and occupational choices). We find both channels equally important: a one standard deviation increase in the polygenic score for educational attainment leads to a 15% increase in lifetime earnings, with 7% attributed to mechanical channels and 8% to behavioral channels. Our paper highlights the value of unifying early-life skill formation and sequential choices into a single framework for understanding genetic influences on lifetime earnings determination.