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How do Education, Cognitive Skills, Cultural and Social Capital Account for Intergenerational Earnings Persistence? Evidence from the Netherlands

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  • Büchner Charlotte
  • Cörvers Frank
  • Traag Tanja
  • Velden Rolf van der

    (METEOR)

Abstract

This study analyzes four different transmission mechanisms, through which father’s earnings affectson’s earnings: the educational attainment, cognitive skills, the cultural capital of the familyand the social capital in the neighborhood. Using a unique data set that combines panel data froma birth cohort with earnings data from a large nationwide income survey and national tax files,our findings show that cognitive skills and schooling of the son account for 50% of the father-sonearnings elasticity. Education by far accounts for the largest part, while cognitive skills mainlywork indirectly through educational attainment. Social capital of the neighborhood and culturalcapital of the parents account for an additional 6% of the intergeneration income persistence.From these two additional mechanisms, social capital appears to play a stronger role than thecultural capital of the parents. This means that 44% of the intergenerational persistence is dueto other unobserved characteristics for example personality traits or spillover effects of familyassets.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 028.

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Date of creation: 2012
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Handle: RePEc:unm:umamet:2012028

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Postal: P.O. Box 616, 6200 MD Maastricht
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Web page: http://www.maastrichtuniversity.nl/
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Keywords: education; training and the labour market;

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  1. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
  2. Hanushek, Eric A. & Woessmann, Ludger, 2005. "Does Educational Tracking Affect Performance and Inequality? Differences-in-Differences Evidence across Countries," IZA Discussion Papers 1901, Institute for the Study of Labor (IZA).
  3. Heisz, Andrew & Corak, Miles, 1998. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Analytical Studies Branch Research Paper Series 1998113e, Statistics Canada, Analytical Studies Branch.
  4. Corak, Miles, 2006. "Do Poor Children Become Poor Adults? Lessons from a Cross Country Comparison of Generational Earnings Mobility," IZA Discussion Papers 1993, Institute for the Study of Labor (IZA).
  5. Gary Solon, 2002. "Cross-Country Differences in Intergenerational Earnings Mobility," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(3), pages 59-66, Summer.
  6. Jo Blanden, 2009. "How much can we learn from international comparisons of intergenerational mobility?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 28283, London School of Economics and Political Science, LSE Library.
  7. Jo Blanden & Paul Gregg & Lindsey Macmillan, 2007. "Accounting for Intergenerational Income Persistence: Noncognitive Skills, Ability and Education," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(519), pages C43-C60, 03.
  8. Lorraine Dearden & Steve Machin & Howard Reed, 1995. "Intergenerational mobility in Britain," IFS Working Papers, Institute for Fiscal Studies W95/20, Institute for Fiscal Studies.
  9. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 411-482, July.
  10. Nybom, Martin & Stuhler, Jan, 2011. "Heterogeneous Income Profiles and Life-Cycle Bias in Intergenerational Mobility Estimation," IZA Discussion Papers 5697, Institute for the Study of Labor (IZA).
  11. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, Elsevier, vol. 13(5), pages 551-570, October.
  12. Jo Blanden, 2009. "How Much Can We Learn from International Comparisons of Intergenerational Mobility?," CEE Discussion Papers, Centre for the Economics of Education, LSE 0111, Centre for the Economics of Education, LSE.
  13. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, American Economic Association, vol. 87(5), pages 1009-18, December.
  14. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(439), pages 1515-26, November.
  15. Grawe, Nathan D., 2003. "Life Cycle Bias in the Estimation of Intergenerational Earnings Persistence," Analytical Studies Branch Research Paper Series 2003207e, Statistics Canada, Analytical Studies Branch.
  16. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1153-89, December.
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