Using 20 years of earnings data on Finnish twins…the total income numbers for females are based on 638 MZ and 1,209 DZ twin pairs and for males on 513 MZ and 1,141 DZ twin pairs…we find that about 40% of the variance of women’s and little more than half of men’s lifetime labour earnings are linked to genetic factors…We show that in the relatively equitable economic and institutional environment of Finland, the share of variance of lifetime earnings explained by education is clearly less than a tenth (in our data).
The contribution of the shared environment is negligible.
We show that the result is robust to using alternative definitions of earnings, to adjusting for the role of education, and to measurement errors in the measure of genetic relatedness.
[Keywords: earnings inequality, heritability, twins, genetics]
…We also provide estimates of group heritability by analysing the importance of heritability of earnings at different points of the earnings distribution. It is possible that eg. certain personality traits have a particularly strong impact on top (or bottom) earnings, leading to variation in earnings heritability across the earnings distribution. However, if the difference between top (or bottom) earnings and the earnings of the whole sample is heritable, the same genetic factors are related to earnings at all parts of the earnings distribution. Group heritability allows measuring how much genetics account for of the mean difference in lifetime earnings between those who are at the tails of the earnings distribution and the rest of the population. It hence allows highlighting whether and why individuals with very high or very low earnings differ as a group from the rest of the population (1985; et al 2014).
We find that the heritability of mean earnings in the tails of lifetime earnings distribution broadly follows similar patterns as that of individuals at large. Group heritability suggests therefore that earnings at the extreme parts of and in the rest of the distribution are, at least in part, related to the same genetic factors (2005; et al 2015).
…These estimates are a bit higher than what we reported in Table 1 for other countries. This observation is consistent with the view that the shorter-term earnings measures lead to lower heritability estimates: A low within-pair correlation suggests that the unshared environmental effects are important, but it may also mirror measurement error at the level of individuals.