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Does Parents' Money Matter?

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Author Info
John Shea
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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6026.

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Date of creation: May 1997
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Handle: RePEc:nbr:nberwo:6026

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Find related papers by JEL classification:
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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  12. Jakubson, George, 1991. "Estimation and Testing of the Union Wage Effect Using Panel Data," Review of Economic Studies, Blackwell Publishing, vol. 58(5), pages 971-91, October. [Downloadable!] (restricted)
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  16. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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  17. Maynard, Rebecca A, 1977. "The Effects of the Rural Income Maintenance Experiment on the School Performance of Children," American Economic Review, American Economic Association, vol. 67(1), pages 370-75, February. [Downloadable!] (restricted)
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  22. Solon, Gary, 1989. "Biases in the Estimation of Intergenerational Earnings Correlations," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 172-74, February. [Downloadable!] (restricted)
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  29. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December. [Downloadable!] (restricted)
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  30. Hausman, Jerry A. & Taylor, William E., 1981. "A generalized specification test," Economics Letters, Elsevier, vol. 8(3), pages 239-245. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Corak, Miles & Heisz, Andrew, 1998. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Analytical Studies Branch Research Paper Series 1998113e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  2. Laura Chadwick & Gary Solon, 2002. "Intergenerational Income Mobility Among Daughters," American Economic Review, American Economic Association, vol. 92(1), pages 335-344, March. [Downloadable!]
  3. Giorgio Di Pietro, 2002. "The Connection Between Access to University and Net Social Welfare Expenditure in Southern Italy," Education Economics, Taylor and Francis Journals, vol. 10(1), pages 25-39, April. [Downloadable!] (restricted)
  4. Dan Maurice Levy & Greg Duncan, 2000. "Using Sibling Samples to Assess the Effect of Childhood Family Income on Completed Schooling," JCPR Working Papers 168, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. Miles Corak & Andrew Heisz, 1998. "The Intergenerational Earnings and Income Mobility of Canadian," Labor and Demography 9808001, EconWPA. [Downloadable!]
  6. Thomas A. Downes & David N. Figlio, 1999. "Economic inequality and the provision of schooling," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 99-110. [Downloadable!]
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