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The impact of parental income and education on the schooling of their children

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Author Info
Arnaud Chevalier
Colm Harmon
Vincent O'Sullivan
Ian Walker () (Institute for Fiscal Studies and University of Warwick)

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Abstract

This paper addresses the intergeneration transmission of education and investigates the extent to which early school leaving (at age 16) may be due to variations in permanent income, parental education levels, and shocks to income at this age. Least squares estimation reveals conventional results - stronger effects of maternal education than paternal, and stronger effects on sons than daughters. We find that the education effects remain significant even when household income is included. Moreover, decomposing the income when the child is 16 between a permanent component and shocks to income at age 16 only the latter is significant. It would appear that education is an important input even when we control for permanent income but that credit constraints at age 16 are also influential. However, when we use instrumental variable methods to simultaneously account for the endogeneity of parental education and paternal income, we find that the strong effects of parental education become insignificant and permanent income matters much more, while the effects of shocks to household income at 16 remain important. A similar pattern of results are reflected in the main measure of scholastic achievement at age 16. These findings have important implications for the design of policies aimed at encouraging pupils to remain in school longer.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W05/05.

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Date of creation: Feb 2005
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Handle: RePEc:ifs:ifsewp:05/05

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Related research
Keywords: Early school leaving; intergenerational transmission;

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Find related papers by JEL classification:
I20 - Health, Education, and Welfare - - Education - - - General
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Freeman, Richard B, 1994. "H. G. Lewis and the Study of Union Wage Effects," Journal of Labor Economics, University of Chicago Press, vol. 12(1), pages 143-49, January.
  2. Black, Sandra & Devereux, Paul J. & Salvanes, Kjell G, 2003. "Why the Apple Doesn't Fall: Understanding Intergenerational Transmission of Human Capital," CEPR Discussion Papers 4150, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Heckman, James J. & Masterov, Dimitriy V., 2004. "Skill Policies for Scotland," IZA Discussion Papers 1444, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Arnaud Chevalier, 2004. "Parental Education and Childs Education: A Natural Experiment," CEE Discussion Papers 0040, Centre for the Economics of Education, LSE. [Downloadable!]
    Other versions:
  5. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2003. "Why the apple doesn't fall far: understanding intergenerational transmission of human capital," CeMMAP working papers CWP16/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  6. Philip Oreopoulos & Marianne E. Page & Ann Huff Stevens, 2003. "Does Human Capital Transfer from Parent to Child? The Intergenerational Effects of Compulsory Schooling," NBER Working Papers 10164, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2004. "Does Education Raise Productivity, or Just Reflect it?," Economic Journal, Royal Economic Society, vol. 114(499), pages F499-F517, November. [Downloadable!] (restricted)
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  8. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  9. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December. [Downloadable!] (restricted)
  10. Björklund, Anders & Lindahl, Mikael & Plug, Erik, 2004. "Intergenerational Effects in Sweden: What Can We Learn from Adoption Data?," IZA Discussion Papers 1194, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Dearden, Lorraine & Machin, Stephen & Reed, Howard, 1997. "Intergenerational Mobility in Britain," Economic Journal, Royal Economic Society, vol. 107(440), pages 47-66, January. [Downloadable!] (restricted)
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  12. Acemoglu, Daron & Pischke, J. -S., 2001. "Changes in the wage structure, family income, and children's education," European Economic Review, Elsevier, vol. 45(4-6), pages 890-904, May. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ian Walker & Yu Zhu, 2008. "Child Support and Educational Outcomes: Evidence from the British Household Panel Survey," Studies in Economics 0811, Department of Economics, University of Kent. [Downloadable!]
  2. Schrage, Andrea, 2007. "Low fertility of highly educated women: the impact of child care infrastructure," Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft 421, University of Regensburg, Department of Economics. [Downloadable!]
  3. Maarten Lindeboom & Ana Llena-Nozal & Bas van der Klaauw, 2006. "Parental Education and Child Health: Evidence from a Schooling Reform," IZA Discussion Papers 2516, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Akee, Randall K. Q. & Copeland, William & Keeler, Gordon & Angold, Adrian & Costello, Jane E., 2008. "Parents’ Incomes and Children’s Outcomes: A Quasi-Experiment," IZA Discussion Papers 3520, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Doyle, Orla & Harmon, Colm & Walker, Ian, 2005. "The Impact of Parental Income and Education on the Health of their Children," CEPR Discussion Papers 5359, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Doyle, Orla & Harmon, Colm & Walker, Ian, 2007. "The Impact of Parental Income and Education on Child Health : Further Evidence for England," The Warwick Economics Research Paper Series (TWERPS) 788, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  7. Ian Walker & Yu Zhu, 2007. "Do Dads matter? Or is it just their money that matters? Unpicking the effects of separation on educational outcomes by and," Working Papers 200722, Geary Institute, University College Dublin. [Downloadable!]
  8. Jeffrey S. DeSimone, 2008. "The Impact of Employment during School on College Student Academic Performance," NBER Working Papers 14006, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Wolter Hassink & Hannah Kiiver, 2007. "Age-dependent Effects of Socio-economic Background on Educational Attainment - Evidence from Germany," Working Papers 07-26, Utrecht School of Economics. [Downloadable!]
  10. Mihails Hazans & Ija Trapeznikova & Olga Rastrigina, 2008. "Ethnic and parental effects on schooling outcomes before and during the transition: evidence from the Baltic countries," Journal of Population Economics, Springer, vol. 21(3), pages 719-749, July. [Downloadable!] (restricted)
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