Nicholas Papageorge, John Hopkins University

Genetic Endowments, Income Dynamics, and Wealth Accumulation Over the Lifecycle



Abstract:

Recent advances have led to the discovery of specific genetic variants that predict educational attainment. Earlier research has examined how these variants, summarized as a linear index - known as a polygenic score - are associated with human capital accumulation, income, financial decisions and wealth at retirement. These findings provide clues to the myriad roles that genetic endowments can play over the lifecycle. Building on these results, the current study specifies and estimates a lifecycle model of household consumption, savings, and portfolio choice that integrates a polygenic score for education. The model incorporates an explicit stock market participation decision with genotype-specific participation costs. We use the model to assess the impact of reducing social security payments.  We show that genetic heterogeneity predicts substantial differences in household reactions to the policy and that households with low polygenic scores are particularly harmed by it.  These results highlight the usefulness of integrating observed molecular genetic data into economic models to understand heterogeneous behavior and welfare consequences of potential policy changes.

Nicholas W. Papageorge is the Broadus Mitchell Associate Professor of Economics at Johns Hopkins University. His research focus is on human capital, broadly construed to include education, physical and mental health, socio-emotional skills and genetic endowments. He mainly uses large observational data sets to examine how people invest in their human capital. He also studies variation in the returns to different forms of human capital, for example, by employment sector, racial groups and socioeconomic status.

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