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The effect of parental wealth on children’s outcomes in early adulthood

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  • Eleni Karagiannaki

Abstract

This paper presents the first UK estimates of the association between parental wealth during adolescence and a range of children's outcomes in early adulthood. Parental wealth is positively associated with all outcomes examined (which include educational attainment, employment, earnings and homeownership). The estimated associations are found to operate over and above parental education and income and in many cases are stronger than them. For labour market outcomes a small share of the association reflects the indirect effect of parental wealth on children's education whereas for homeownership the estimated association appear to mainly reflect the effect of parental wealth transfers. Further analysis by wealth component shows that degree attainment is more strongly associated with housing wealth than financial wealth. However, important effects are also estimated for financial wealth indicating the existence of financial constraints for low wealth-financial indebted households. For homeownership and earnings the estimated association are stronger for financial wealth.

Suggested Citation

  • Eleni Karagiannaki, 2012. "The effect of parental wealth on children’s outcomes in early adulthood," CASE Papers case164, Centre for Analysis of Social Exclusion, LSE.
  • Handle: RePEc:cep:sticas:case164
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    File URL: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper164.pdf
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    References listed on IDEAS

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    1. Arnaud Chevalier & Gauthier Lanot, 2002. "The Relative Effect of Family Characteristics and Financial Situation on Educational Achievement," Education Economics, Taylor & Francis Journals, vol. 10(2), pages 165-181.
    2. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
    3. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
    4. Zhan, Min, 2006. "Assets, parental expectations and involvement, and children's educational performance," Children and Youth Services Review, Elsevier, vol. 28(8), pages 961-975, August.
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    More about this item

    Keywords

    wealth; intergenerational transmission; educational attainment;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D3 - Microeconomics - - Distribution
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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