Does Parents' Money Matter?

60 Pages Posted: 15 Aug 2000 Last revised: 21 Dec 2022

See all articles by John Shea

John Shea

University of Maryland - Department of Economics

Date Written: May 1997

Abstract

This paper asks whether parental income per se has a positive impact on children's human capital accumulation. Previous research has established that income is positively correlated across generations. This does not prove that parents' money matters, however, since income is presumably correlated with unobserved abilities transmitted across generations. This paper estimates the impact of parental income by focusing on variation due to parental factors -- union, industry, and job loss experience -- that arguably represent luck. When I examine a nationally representative sample, I find that changes in parental income due to luck have at best a negligible impact on children's human capital. On the other hand, I find that parental income does matter in a sample of low income families. These findings are potentially consistent with models in which credit market imperfections constrain low income households to make suboptimal investments in their children.

Suggested Citation

Shea, John S., Does Parents' Money Matter? (May 1997). NBER Working Paper No. w6026, Available at SSRN: https://ssrn.com/abstract=226436

John S. Shea (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3491 (Phone)
301-405-3542 (Fax)

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