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The Impact of Parental Earnings and Education on the Schooling of Children

  • Arnaud Chevalier

    (Royal Holloway, University of London, IZA)

  • Colm Harmon

    (University College Dublin, Australian National University, IZA)

  • Vincent O'Sullivan

    (TILDA, Trinity College Dublin, The ESRI)

  • Ian Walker

    (Lancaster University Management School, IZA)

This paper addresses the intergenerational transmission of education and investigates the extent to which early school leaving (at age 16) may be due to variations in parental background. An important contribution of the paper is to distinguish between the causal effects of parental income and parental education levels. Least squares estimation reveals conventional results – weak effects of income (when the child is 16), 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. However, when we use instrumental variable methods to simultaneously account for the endogeneity of parental education and paternal income, only maternal education remains significant (for daughters only) and becomes stronger. These estimates are consistent across various sets of instruments. The impact of paternal income varies between specifications but becomes insignificant in our favored specifications. Our results provide only limited support for policies that alleviate income constraints at age 16 in order to alter schooling decisions. In contrast, our results do suggest that policies which increase permanent income would lead to increased participation (especially for daughters).

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Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 201112.

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Length: 42 pages
Date of creation: 29 Jun 2011
Date of revision:
Handle: RePEc:ucd:wpaper:2011/12
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  1. Carneiro, Pedro & Meghir, Costas & Parey, Matthias, 2007. "Maternal Education, Home Environments and the Development of Children and Adolescents," CEPR Discussion Papers 6505, C.E.P.R. Discussion Papers.
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  11. Løken, Katrine V., 2010. "Family income and children's education: Using the Norwegian oil boom as a natural experiment," Labour Economics, Elsevier, vol. 17(1), pages 118-129, January.
  12. Arnaud Chevalier, 2004. "Parental Education and Childs Education: A Natural Experiment," CEE Discussion Papers 0040, Centre for the Economics of Education, LSE.
  13. Sandra Black & Paul Devereux & Kjell Salvanes, 2004. "Why the apple doesn't fall far: understanding intergenerational transmission of human capital," Working Paper Series 2004-12, Federal Reserve Bank of San Francisco.
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  16. 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.
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  22. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2002. "Does education raise productivity, or just reflect it?," Working Papers 10197/1104, School of Economics, University College Dublin.
  23. Stephen Machin & Kjell G. Salvanes & Panu Pelkonen, 2012. "Education And Mobility," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 417-450, 04.
  24. Anders Björklund & Mikael Lindahl & Erik Plug, 2006. "The Origins of Intergenerational Associations: Lessons from Swedish Adoption Data," The Quarterly Journal of Economics, MIT Press, vol. 121(3), pages 999-1028, 08.
  25. Chevalier, Arnaud & Harmon, Colm & Walker, Ian & Zhu, Yu, 2003. "Does Education Raise Productivity or Just Reflect It?," CEPR Discussion Papers 3993, C.E.P.R. Discussion Papers.
  26. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
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