Family Background, Education and Employment in Urban Ethiopia†

Most studies suggest that family background has a strong effect on earnings both directly and indirectly through the returns to own education. However, such effects might reflect the influence of family background on entry into work rather than a productive effect on earnings. The paper uses data from a survey of 16–29 year olds in urban Ethiopia to examine the impact of family background on selection into work and earnings. Family background strongly influences entry into the public sector; accounting for such selection removes its impact on earnings. This contrasts with the persistence of family background effects on private sector earnings.