These estimates are similar to those in table 4 of

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number of years. These estimates are similar to those in Table 4 of LM°s work. 5 Table 3 presents 2SLS estimates of equation (2). Panel A reveals that an additional year of schooling increases the probability of having any investment income by 7.6%. For retirement investments, an additional year of schooling increases the probability of non-zero income by about 5.9%. These estimates are somewhat larger than the OLS estimates in table 1, suggesting a downward bias in the OLS. In panel B, we study the amount of income from these assets and ±nd a large and signi±cant e/ect on both types of investment income. The magnitudes are quite large, substantially larger than the OLS estimates; an additional year of schooling increases investment income and retire- ment income by $1767 and $979 respectively. 6 Education also improves an individual°s position in the distribution of investment income (as a percentage of total income) as shown in panel C. These results are robust to using high school completion, rather than years of schooling, as the measure of educational attainment. Including a cubic in earned income (which includes wages and income from one°s own business or farm) as a control does not a/ect the results appreciably. The striking fact is that no matter how many income controls we include, we ±nd persistent, large, di/erences in participation by education. To get a sense of these point estimates, we conduct a back-of-the-envelope calibration exer- cise. This calibration also helps us to understand the source of the increase: does education raise investment earnings simply because households earn more money, while keeping the fraction of income saved constant, or does it a/ect the savings rate as well? The average individual in our sample is 49 years old. To simplify the algebra, we assume he earned a constant $20,000 (the average income for high school graduates in our sample) since he was 20 years old, 7 saved a constant 10% of his income at the end of each year and earned a 5 µWeak instrument°bias is not a problem in this context. We report the F-statistics of the excluded instruments in Table 3. The F-statistics range from 44.5 to 49.9, well above the critical values proposed by Stock and Yogo (2005). 6 Using IV Tobit for investment income yields very similar results; results are available on request. 7 Using the average income at each age gives very similar estimates. 12
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5% return on his assets. Assuming one additional year of schooling boosts wage income by of 7% (an estimate from Acemoglu and Angrist 2000), if the individual°s savings rate did not vary with schooling, an additional year would increase his savings by ($20,000)*(0.07)*(0.1) = $140 per year. At the age of 49, his accumulated savings would be greater by about $9,000, and his income from investments approximately $450 higher.
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