Twin Data vs. Longitudinal Data to Control for Unobserved Variables in Earnings Functions - Which Are the Differences?

This paper compares two different approaches empirically to control for unobserved characteristics when estimating the effect of marriage on male and female earnings: the longitudinal and the twins approach. The estimates were obtained by exploiting the longitudinal dimension of a large sample of Swedish twins, so that longitudinal and twin-based estimates could be obtained in the same sample. The two approaches lead to different conclusions both regarding the role of unobserved characteristics in the cross-sectional earnings-marriage relationship and the effect of marriage on earnings. The paper investigates three potential explanations of this difference. Copyright 2007 Blackwell Publishing Ltd and the Department of Economics, University of Oxford.