Educational Attainment and Family Background

. This paper analyses the effect of aspects of family background, such as family income and parental education, on the educational attainment of persons born from 1967 to 1972. Family income is measured at different periods of a child's life to separate long‐term versus short‐term effects of family income on educational choices. We find that permanent income matters to a certain degree, and that family income when the child is 0–6 years old is an important explanatory variable for educational attainment later in a child's life. We find that short‐term credit constraints have only a small effect on educational attainment. Long‐term factors, such as permanent family income and parental education, are much more important for educational attainment than are short‐term credit constraints. Public interventions to alleviate the effects of family background should thus also be targeted at a child's early years, the shaping period for the cognitive and non‐cognitive skills important later in life.