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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

    (ROA rm)

Abstract

This study analyzes four different transmission mechanisms, through which father’searnings affect son’s earnings: the educational attainment, cognitive skills, the culturalcapital of the family and the social capital in the neighborhood. Using a unique dataset that combines panel data from a birth cohort with earnings data from a largenationwide income survey and national tax files, our findings show that cognitive skillsand schooling of the son account for 50% of the father-son earnings elasticity. Educationby far accounts for the largest part, while cognitive skills mainly work indirectly througheducational attainment. Social capital of the neighborhood and cultural capital of theparents account for an additional 6% of the intergeneration income persistence. Fromthese two additional mechanisms, social capital appears to play a stronger role than thecultural capital of the parents. This means that 44% of the intergenerational persistenceis due to other unobserved characteristics for example personality traits or spillovereffects of family assets.

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Bibliographic Info

Paper provided by Maastricht University, Research Centre for Education and the Labour Market (ROA) in its series ROA Research Memorandum with number 007.

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Date of creation: 2012
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Handle: RePEc:unm:umaror:2012007

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Web page: http://www.maastrichtuniversity.nl/
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Keywords: labour economics ;

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  1. Eric A. Hanushek & Ludger Wößmann, 2005. "Does Education Tracking Affect Performance and Inequality? Differences-In-Differences Evidence Across Countries," Discussion Papers, Stanford Institute for Economic Policy Research 04-027, Stanford Institute for Economic Policy Research.
  2. Miles Corak & Andrew Heisz, 1999. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 504-533.
  3. 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).
  4. 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.
  5. Jo Blanden & Paul Gregg & Lindsey Macmillan, 2006. "Accounting for Intergenerational Income Persistence: Non-Cognitive Skills, Ability and Education," CEE Discussion Papers, Centre for the Economics of Education, LSE 0073, Centre for the Economics of Education, LSE.
  6. 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.
  7. 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.
  8. Dearden, Lorraine & Machin, Stephen & Reed, Howard, 1997. "Intergenerational Mobility in Britain," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(440), pages 47-66, January.
  9. Grawe, Nathan D., 2006. "Lifecycle bias in estimates of intergenerational earnings persistence," Labour Economics, Elsevier, Elsevier, vol. 13(5), pages 551-570, October.
  10. 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.
  11. 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.
  12. Gary Solon, 2002. "Cross-Country Differences in Intergenerational Earnings Mobility," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 59-66, Summer.
  13. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
  14. 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.
  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. 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).
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