Genes, Education, and Labor Market Outcomes: Evidence from the Health and Retirement Study

Abstract

Recent advances in behavioral genetics allow us to overcome past limitations on the study of genes and human capital accumulation. We build on this progress to explore the relationship between observed genetic variants, educational attainment, and labor market outcomes in the Health and Retirement Study (HRS). We demonstrate that observed genetic variants, summarized as a genetic score variable, can explain 3.2-6.6 percent of the variation in educational attainment depending on the specification. Incorporating this genetic information into economic analysis using a rich longitudinal data set allows us to better understand the structure of ability endowments, including how they interact with childhood environments to predict a host of labor market outcomes. Understanding these interactions is particularly important for designing appropriate policies to reduce economic disparities. A recurring theme in our findings is that individuals who grew up in economically disadvantaged households face worse outcomes compared to individuals with the same genetic score, but from higher-SES households. This suggests the existence of unrealized human potential and also raises the possibility that human capital investments could lead to a more efficient use of human resources.