The Impact of Parental Income and Education on the Schooling of Their Children

34 Pages Posted: 26 Feb 2005

See all articles by Arnaud Chevalier

Arnaud Chevalier

University College Dublin (UCD) - Institute for the Study of Social Change; IZA Institute of Labor Economics

Colm P. Harmon

The University of Sydney - School of Economics; IZA Institute of Labor Economics

Vincent O'Sullivan

University College London

Ian Walker

University of Warwick - Department of Economics; Institute for Fiscal Studies (IFS); IZA Institute of Labor Economics

Date Written: February 2005

Abstract

This paper addresses the intergeneration transmission of education and investigates the extent to which early school leaving (at age 16) may be due to variations in permanent income, parental education levels, and shocks to income at this age. Least squares estimation reveals conventional results - 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. Moreover, decomposing the income when the child is 16 between a permanent component and shocks to income at age 16 only the latter is significant. It would appear that education is an important input even when we control for permanent income but that credit constraints at age 16 are also influential. However, when we use instrumental variable methods to simultaneously account for the endogeneity of parental education and paternal income, we find that the strong effects of parental education become insignificant and permanent income matters much more, while the effects of shocks to household income at 16 remain important. A similar pattern of results are reflected in the main measure of scholastic achievement at age 16. These findings have important implications for the design of policies aimed at encouraging pupils to remain in school longer.

Keywords: early school leaving, intergenerational transmission

JEL Classification: I20, J62

Suggested Citation

Chevalier, Arnaud and Harmon, Colm P. and O'Sullivan, Vincent and Walker, Ian, The Impact of Parental Income and Education on the Schooling of Their Children (February 2005). IZA Discussion Paper No. 1496. Available at SSRN: https://ssrn.com/abstract=673407

Arnaud Chevalier

University College Dublin (UCD) - Institute for the Study of Social Change ( email )

Belfield
Dublin 4
Ireland
+353 1 716 4616 (Phone)
+353 1 716 1108 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Colm P. Harmon (Contact Author)

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
Sydney, NSW 2006 2008
Australia

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Vincent O'Sullivan

University College London

Gower Street
London
United Kingdom

Ian Walker

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 1203 523 054 (Phone)
+44 1203 523 032 (Fax)

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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