How important is family background for labor-economic outcomes?

This paper uses Swedish register data to examine four classical outcomes in empirical labor economics: IQ, noncognitive skills, years of schooling and long-run earnings. We estimate sibling correlations – and the variance components that define the sibling correlation – in these outcomes. We also estimate correlations for MZ-twins, who share all genes. We also extend the variance-component decomposition by accounting for birth order. We find that conventional intergenerational approaches severely underestimate the role of family background, and that future research should follow a more multidimensional approach to the study of family background.

► We estimate sibling correlations in five central labour-economic outcomes.
► These correlations suggest a large role for family background.
► Conventional intergenerational models underestimate the role of family background.
► Future research should find out what siblings share more than parental income.