The effect of home country’s income on immigrant-origin children’s education: Evidence from Australia

Using plausibly exogenous fluctuations in foreign real income per capita and longitudinal data from Australia, we examine the impact of economic conditions in immigrant parents’ home countries on their children’s academic performance. We find that a one percent increase in real GDP per capita in parents’ home countries leads to a 0.01 standard deviation improvement in children’s standardised test scores. The effect is particularly pronounced among children with parents born in Asia, where extended family ties play a strong role. Our mediation analysis suggests that the impact is likely driven by increased private tutoring. These findings imply that economic conditions in immigrants’ home countries can shape the educational outcomes and future economic prospects of their children in destination countries, likely through family and social networks.