Using a new twins sample, presents new estimates of schooling returns and "ability" bias and tests that bias's significance. Ability bias may exist even if ability's genetically-endowed component does not affect schooling decisions directly when correlated with other family characteristics (like income) that do affect schooling. (19…

Reexamines Ashenfelter and Krueger's estimates of schooling returns (13%), using three additional years of the same twins survey. Finds a 10% return per year of schooling completed. The within-twin regression estimate of schooling's effect in the log wage is smaller than the cross-sectional estimate. (14 references) (MLH)

Recent within-twin estimates of schooling returns are considerably higher than existing estimates. This paper shows that small ability differences among twins can yield more upward omitted-ability bias (and more upward bias overall) in the instrumental variables estimate correcting for measurement error than in the standard within-twin estimate.…