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

Recent advances have led to the discovery of specific genetic variants that predict educational attainment. We study how these variants, summarized as a genetic score variable, are associated with human capital accumulation and labor market outcomes in the Health and Retirement Study (HRS). We demonstrate that the same genetic score that predicts education is also associated with higher wages, but only among individuals with a college education. Moreover, the genetic gradient in wages has grown in more recent birth cohorts, consistent with interactions between technological change and labor market ability. We also show that individuals who grew up in economically disadvantaged households are less likely to go to college when compared to individuals with the same genetic score, but from higher socioeconomic status households. Our findings provide support for the idea that childhood socioeconomic status is an important moderator of the economic returns to genetic endowments. Moreover, the finding that childhood poverty limits the educational attainment of high-ability individuals suggests the existence of unrealized human potential

Why Don’t People Trust Experts?

Credence goods such as health care, legal and financial services, and auto repair create a conflict of interest by requiring experts to diagnose and provide services to uninformed consumers. Mistreatment of consumers appears widespread empirically, but a simple explanation for mistreatment under realistic assumptions has proved elusive. I generalize Uwe Dulleck and Rudolf Kerschbamer’s credence-good model to incorporate the highly realistic assumption that consumers do not observe experts’ cost functions. The model guarantees equilibrium mistreatment in a wide range of price-setting and market environments. The model also yields testable implications regarding the nature of mistreating firms and the direction of mistreatment

Why Don’t People Trust Experts?

Credence goods such as health care, legal and financial services, and auto repair create a conflict of interest by requiring experts to diagnose and provide services to uninformed consumers. Mistreatment of consumers appears widespread empirically, but a simple explanation for mistreatment under realistic assumptions has proved elusive. I generalize Uwe Dulleck and Rudolf Kerschbamer’s credence-good model to incorporate the highly realistic assumption that consumers do not observe experts’ cost functions. The model guarantees equilibrium mistreatment in a wide range of price-setting and market environments. The model also yields testable implications regarding the nature of mistreating firms and the direction of mistreatment