Does Education Increase Income? Comparing Twin Studies from 7 Countries

The relationship between education and income is a theme that interests many people.

It is said that people who receive higher education tend to have higher incomes, but is this really true?

In fact, research using a unique method called “twin studies” has been conducted to elucidate this problem.

In “twin studies,” the effects of education can be measured more accurately by analyzing data from genetically identical twins.

Recently, large-scale surveys using “twin studies” have been conducted in Japan, attracting attention.

The research results are summarized in the paper “Estimating the Returns to Education Using a Sample of Twins -The case of Japan-“.

This article will consider the relationship between education and income while explaining the contents of that paper in an easy-to-understand manner.

Let’s look at how the effects of education are measured using twin data, and how Japan’s educational returns compare to other countries.

We will explore the answer to whether education truly increases income.

今回も、性格研究者で悪者図鑑著者のトキワ(@etokiwa999)が解説していきます。
※HEXACO-JP性格診断を開発しました！MBTIより科学的根拠があります。詳細は以下タップしてください。

※This article is very much related to this article. Please take a look.

年収の遺伝は年を取ると60%！若い時は家庭環境！論文解説

What are “Twin Studies” that Explore the Relationship Between Education and Income?

The Purpose of Estimating Educational Returns Through “Twin Studies”

The purpose of “twin studies” is to accurately measure how much income increases by receiving education.

While people with longer years of education tend to have higher incomes, it’s unclear whether this is the effect of education or differences in inherent ability.

To solve this problem, “twin studies” use data from identical twins.

Since identical twins are genetically the same, the impact of differences in years of education on income differences can be measured more accurately.

The effect of education on income measured in this way is called the “returns to education” and serves as an important indicator for evaluating the value of educational investment.

“Twin studies” can be said to be a powerful research method for clarifying the causal relationship between education and income.

Benefits of “Twin Studies”: Ability to Exclude the Influence of Genetics and Family Environment

The greatest benefit is being able to remove the influences of genetics and family environment to measure the pure effect of education.

Identical twins are genetically identical and grew up in the same family environment.

Therefore, if there are differences in years of education between twins, it is likely the effect of factors other than genetics and family environment, namely the effect of education.

In contrast, general studies have had the problem of being unable to completely remove influences such as:

• Differences in genetic ability
• Educational disparities due to differences in family income

“Twin studies” are a groundbreaking research method that can overcome such problems and get closer to the causal effects of education.

“Twin studies” can be said to be a very useful approach in exploring the relationship between education and income.

Results of Twin Studies on Education and Income in Japan

Overview of Japanese Twin Data Used in the Analysis

This study used data from 2,360 pairs of twins, totaling 4,720 people, collected from across Japan.

The breakdown is as follows:

• Identical twins: 1,371 pairs, 2,742 people
• Fraternal twins: 882 pairs, 1,764 people
• Twins of unknown zygosity: 107 pairs, 214 people

The data was collected through a large-scale web survey.

The main attributes of the respondents are as follows:

• Average age: 39 years
• Average years of education: 14.6 years
• Average annual income: 4.096 million yen

This study is the first large-scale survey targeting twins nationwide in Japan, providing valuable data for exploring the relationship between education and income.

By using twin data, more reliable analysis results are expected to be obtained.

Comparison Within Twins Shows Educational Returns of About 4.5%

When comparing differences in years of education and income differences within twin pairs, the returns to education were about 4.5%.

This analysis looks at income differences when only years of education differ among twins with the same genetics and family environment.

Specifically, the following results were obtained:

• Comparison within identical twins: Returns to education is 4.5%
• Comparison within fraternal twins: The return to education is 5.4%

In the comparison between twins, identical twins show a lower return rate, while fraternal twins show a slightly higher rate.

This is thought to be because identical twins are genetically more similar, so the effects of education appear more purely.

In other words, the 10% figure obtained from simple comparisons was likely inflated by the influence of genetics and family environment.

Through within-twin comparisons, it became clear that the income-increasing effect of education is approximately 4.5%.

When measurement error is corrected, the return to education is approximately 9.3%

The 4.5% figure obtained from within-twin comparisons may be underestimated due to the influence of measurement error.

Therefore, when measurement error was corrected using high school deviation scores, the return to education became 9.3%.

The results of the analysis using identical twin data are as follows.

• Before correcting measurement error: The return to education is 4.5%
• After correcting measurement error: The return to education is 9.3%

By correcting measurement error, the return to education has jumped to approximately twice the initial estimate.

This is thought to be because the influence of measurement error becomes larger in within-twin comparisons.

By appropriately correcting measurement error, the return to education can be estimated more accurately.

Based on these results, it can be concluded that the return to education in Japan is approximately 9%.

In Japan, it was confirmed that the longer the years of education, the higher the annual income tends to be

This research confirmed that in Japan, there is a tendency for annual income to be higher with longer years of education.

The result obtained was that one additional year of education increases annual income by approximately 9%.

This suggests that education plays an important role in increasing income in Japanese society.

However, this result does not completely prove the causal effect of education.

• Does the difference in years of education create the difference in income?
• Are people who can earn income receiving longer education?

Further examination is needed regarding the direction of causality.

Also, the return to education is an average value, and individual differences are thought to be large.

It should be noted that receiving education does not necessarily lead to high income.

This research can be said to be significant in that it provided new data on the relationship between education and income in Japan.

Comparison with research on education and annual income in China

In China, the return to education is 3.8%, lower than Japan

Similar “twin research” has been conducted in China, where the return to education is estimated at 3.8%.

Compared to Japan’s analysis results, China’s return to education remains at less than half the level.

The main results of the “twin research” in China are as follows.

• Simple comparison: The return to education is 8.4%
• Within-twin comparison: The return to education is 2.7%
• Analysis correcting measurement error: The return to education is 3.8%

Similar to Japan, in China the return to education also decreased significantly in within-twin comparisons.

However, even after correcting measurement error, it remained at 3.8%, significantly below Japan’s 9.3%.

This result suggests that the return to education in China is considerably lower compared to Japan.

The impact that education has on income increase is thought to be not as large as in Japan.

Further examination is needed regarding the factors that cause differences in returns to education between Japan and China.

China and Japan have similar exam-focused education systems, so why are they different?

China and Japan are both similar in having exam-focused education systems.

However, looking at the results of “twin research,” it can be seen that there are large differences in returns to education.

• China: The return to education is 3.8%
• Japan: The return to education is 9.3%

Why do such differences occur between countries with similar education systems?

The following points can be considered as reasons for this.

• Differences in labor market structure
• Differences in education quality
• Differences in social evaluation

There is a possibility that the mechanisms for economically evaluating education differ between China and Japan.

Perhaps even without much education, people are seizing opportunities through motivation and natural ability to increase their annual income.

Also, detailed differences in education systems may be influencing returns to education.

If educational content matches job content, the more education you receive, the higher your annual income will be. However, if they don’t match, it won’t affect your annual income.

The comparison between China and Japan provides rich insights when considering factors that influence the return on education.

Japan Begins Emphasizing Elements Other Than Written Exams in University Entrance Exams

In Japan’s university entrance exams, there is a growing movement to evaluate elements other than written tests.

Specifically, the following types of entrance exam methods are being introduced:

• AO entrance exams: Evaluate not only academic tests but also interviews, essays, and activity records
• Recommendation entrance exams: Make comprehensive judgments including high school grades, activities, and personal evaluations

These movements can be seen as attempts to evaluate abilities that cannot be measured by exam preparation alone.

In contrast, it is pointed out that China’s university entrance exams still remain centered on written tests.

Changes in Japan’s university entrance exams may be one factor that increases the return on education.

This is because the evaluation of abilities other than written tests is thought to make it easier to acquire skills through education that lead to income.

However, this is merely one possibility.

Further verification will be needed regarding the impact that differences in entrance exam systems have on the return on education.

The nature of university entrance exams appears to be one important factor that influences the economic value of education.

Possibility That Differences in Quality of Governance Affect the Return on Education

The quality of governance may be related to differences in the return on education.

Looking at the “Worldwide Governance Indicators” published by the World Bank, we can see there is a large gap between Japan and China.

• Japan: Receives high evaluations for political stability, rule of law, control of corruption, etc.
• China: Receives lower evaluations than Japan for government effectiveness, regulatory quality, control of corruption, etc.

In other words, Japan has higher quality governance and tends to respect citizens’ rights more.

Such differences may be influencing the return on education.

This is because in countries with high quality governance, abilities acquired through education are thought to be more easily evaluated appropriately in the labor market.

Also, in societies with little corruption where rule-based competition takes place, the possibility that investment in education will be rewarded becomes higher.

On the other hand, in societies with governance problems, there is a risk that even if one receives education, its effects may not be fully realized.

When considering the relationship between education and income, it seems necessary to also look at the quality of institutions and policies.

Comparison with Western “Education and Annual Income” Research

Education and Annual Income: The Case of America

“Twin studies” conducted in America estimate the return on education to be approximately 8-13%.

The main research results are as follows:

• Ashenfelter & Krueger (1994): 12.9%
• Behrman et al. (1994): 10.1%
• Rouse (1998): 11.0%

These results are somewhat higher compared to Japan’s educational return rate (9.3%), but it can be said there is no large difference.

However, it’s also necessary to note that there is variation in estimated values depending on the study.

America’s educational return rate is considered to be around 10%, similar to Japan.

America and Japan appear to be in quite similar positions regarding the magnitude of education’s impact on income.

The economic benefits obtained by extending years of education are considered to be almost equivalent in both countries.

However, since educational systems and labor market structures differ between Japan and the US, it’s necessary to note that simple comparisons are difficult.

America’s analysis results can be said to serve as one reference when considering Japan’s educational return rate levels.

Education and Annual Income: The Case of the United Kingdom

“Twin studies” in the United Kingdom estimate the return on education to be approximately 4-8%.

Representative research results are as follows:

• Bonjour et al. (2003): 3.9% in within-twin comparisons, 7.7% when correcting for measurement error

This result is somewhat lower than Japan’s educational return rate (9.3%).

However, the value corrected for measurement error becomes close to Japan’s.

While the effect of education increasing income is recognized to some extent in the UK as well, it’s considered not as large as in Japan.

The following points can be considered as reasons why this difference occurs:

• Differences in educational systems
• Differences in labor market structures
• Differences in the positioning of education in society as a whole

However, these are merely speculations. More detailed analysis can be said to be necessary.

The analysis results from the UK suggest that the rate of return to education varies by country.

Comparisons that take into account each country’s institutions and culture are considered important.

Education and Annual Income: The Case of Australia

A “twin study” conducted in Australia estimated the rate of return to education at approximately 3-6%.

The analysis results by Miller et al. (1995) are as follows.

• Simple comparison: 6.4%
• Within-twin comparison: 2.5%
• Analysis corrected for measurement error: 4.8%

This result falls significantly below Japan’s rate of return to education (9.3%).

In Australia, it is suggested that the increase in income from receiving education is not as large as in Japan.

However, caution is needed when interpreting these results.

Australia and Japan have significantly different education systems and social structures.

Simply comparing numerical values may not allow for an appropriate evaluation of the value of education.

Additionally, differences in analytical methods may have influenced the results.

It can be said that more detailed comparisons are necessary.

Australia’s analysis results suggest challenges in international comparisons of rates of return to education.

Careful discussion that takes into account differences in institutions and culture is required.

Education and Annual Income: The Case of Sweden

Swedish “twin studies” estimated the rate of return to education at approximately 2-5%.

The main research results are as follows.

• Isacsson (1999): 2.2% for within-twin comparison, 2.4% when corrected for measurement error
• Isacsson (2004): 2.8% for within-twin comparison, 5.2% when corrected for measurement error

These results are at a considerably lower level compared to Japan’s rate of return to education (9.3%).

In Sweden, the impact of education on income is considered to be less significant than in Japan.

However, what causes this difference is not clear.

Possible factors that could be considered include the following points.

• Differences in social evaluation of education
• Differences in income redistribution policies
• Differences in labor market regulations

However, these are merely speculations. It can be said that more detailed analysis is necessary.

Sweden’s analysis results show that rates of return to education vary significantly by country.

Comparisons that take into account each country’s social systems and culture are considered important.

貧困層こそ非認知能力が重要！理由や鍛え方を解説

Education and Annual Income: The Case of Denmark

Danish “twin studies” estimated the rate of return to education at approximately 1-5% for men and approximately 1-4% for women.

The analysis results by Bingley et al. (2005) are as follows.

• Men: 0.5% for within-twin comparison, 4.5% when corrected for measurement error
• Women: 0.9% for within-twin comparison, 4.4% when corrected for measurement error

These results are at a considerably lower level compared to Japan’s rate of return to education (9.3%).

Additionally, it can be seen that the difference between men and women is small.

In Denmark, the impact of education on income is considered to be less significant than in Japan.

As reasons for this difference, the following points could be considered.

• Differences in income redistribution policies
• Differences in labor market regulations
• Differences in social evaluation of education

However, these are merely speculations.

It can be said that more detailed analysis is necessary.

Denmark’s analysis results suggest that rates of return to education vary significantly by country.

Comparisons that take into account each country’s institutions and culture are considered important.

The Relationship Between Education and Annual Income as Revealed by “Twin Studies”

The Tendency for Longer Education to Lead to Higher Annual Income Was Indeed True

From the results of “twin studies,” it was found that the tendency for longer years of education to lead to higher annual income was indeed true.

In Japan, it is estimated that one additional year of education increases annual income by approximately 9%.

This suggests that education plays an important role in increasing income.

However, this result does not completely prove the causal effect between annual income and education.

“Twin studies” provide new insights into the relationship between education and income.

In the future, as more detailed analysis progresses, it is expected that the economic value of education will become even clearer.

However, the rate of return on education is about 9%, slightly lower than 10%

Japan’s educational rate of return is approximately 9%, which is somewhat lower than the 10% obtained from simple comparisons.

This is thought to be due to the following factors:

• Simple comparisons include the effects of genetics and family environment
• In within-twin comparisons, the rate of return on education is underestimated due to the effects of measurement error

By using the analytical method of “twin studies,” these problems are resolved and more accurate estimates can be obtained.

However, the figure of 9% is by no means low.

It can be said that investment in education provides sufficient economic returns.

It has also become clear that the rate of return on education varies by country.

Japan’s educational rate of return is considered to be in the high category compared to Western countries.

“Twin studies” play an important role in measuring the economic value of education.

In the future, as further data accumulation and analysis progress, it is expected that more accurate estimates will be obtained.

非共有環境とは？努力できる性格を作るために必要な環境

Still, investment in education can be said to be sufficiently valuable

While it has been found that the rate of return on education is about 9%, slightly lower than 10%, investment in education can still be said to be sufficiently valuable.

The reasons are as follows:

• Education not only increases income but also enriches life in various ways
• By receiving education, one can gain more diverse options
• Highly educated people tend to have low unemployment risk and earn stable income

The value of education cannot be measured solely by income increase.

Education plays an important role in enriching life and expanding possibilities.

Furthermore, investment in education also leads to benefits for society as a whole.

When educated people are active, innovation is born and the economy develops.

Such social value of education is difficult to express in numbers, but it can be said to be extremely important.

“Twin studies” have great significance in clarifying the economic value of education, but the true value of education needs to be understood from a broader perspective.

Investment in education has very important meaning for both individuals and society.

幼児教育は何をやるべき？方法や効果を科学的に解説

The necessity of elucidating the mechanism by which education increases income

“Twin studies” have revealed that there is a tendency for income to be higher as the number of years of education increases.

However, the mechanism by which education increases income has not yet been sufficiently elucidated.

Clarifying this point can be said to be extremely important when considering education policy.

Possible mechanisms include the following:

• Through education, one can acquire skills and knowledge useful for work
• Highly educated people are more likely to get more advanced jobs
• Through education, one can expand their human network
• Through education, non-cognitive abilities are likely to improve

However, these are merely hypotheses.

It can be said that empirical research is necessary.

Also, examination is needed regarding the impact of educational content and quality on income.

This is because not only the number of years of education, but what and how one learns is considered important.

Elucidating the mechanism by which education increases income can be said to be an important issue in enhancing the economic value of education.

“Twin studies” will provide useful insights for tackling this issue.

非認知能力とは？８つの種類と鍛え方を科学的に説明

Conclusion

In this article, we introduced Japanese research that explored the relationship between education and income using the “twin study” methodology.

By analyzing twin data, we found that the effects of education can be measured more accurately.

In Japan, the results show that one additional year of education increases income by approximately 9%.

This suggests that education plays an important role in increasing income.

However, the rate of return on education is influenced by various factors.

Even when educational systems are similar, as in Japan and China, the rates of return can differ significantly.

Moreover, the effects of education are not limited to simply increasing income.

Education broadens life choices and contributes to the development of society as a whole.

We must not forget this broader significance of education.