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The Causal Effect of Parents’ Education on Children’s Earnings

Author

Listed:
  • Sang Yoon (Tim) Lee
  • Nicolas A. Roys
  • Ananth Seshadri
Abstract
We present a model of endogenous schooling and earnings to isolate the causal effect of parents’ education on children’s education and earnings outcomes. The model suggests that parents’ education is positively related to children’s earnings, but its relationship with children’s education is ambiguous. Identification is achieved by comparing the earnings of children with the same length of schooling, whose parents have different lengths of schooling. The model also features heterogeneous preferences for schooling, and is estimated using HRS data. The empirically observed positive OLS coefficient obtained by regressing children’s schooling on parents’ schooling is mainly accounted for by the correlation between parents’ schooling and children’s unobserved preferences for schooling. This is countered by a negative, structural relationship between parents’ and children’s schooling choices, resulting in an IV coefficient close to zero when exogenously increasing parents’ schooling. Nonetheless, an exogenous one-year increase in parents’ schooling increases children’s lifetime earnings by 1.2 percent on average.

Suggested Citation

  • Sang Yoon (Tim) Lee & Nicolas A. Roys & Ananth Seshadri, 2024. "The Causal Effect of Parents’ Education on Children’s Earnings," NBER Working Papers 32223, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32223
    Note: EFG
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    Cited by:

    1. Churchill, Sefa Awaworyi & Chang, Simon & Smyth, Russell & Trinh, Trong-Anh, 2024. "The Long Run Gender Origins of Entrepreneurship: Evidence from Australia's Convict History," IZA Discussion Papers 17170, Institute of Labor Economics (IZA).
    2. Issofou Njifen, 2024. "Education-Job mismatch, earnings and worker’s satisfaction in African labor market: evidence from Cameroon," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(3), pages 931-962, October.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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