Intergenerational Transmission of Poverty and Inequality: Parental Resources and Schooling Attainment and Children’s Human Capital in Ethiopia, India, Peru, and Vietnam

Academic and policy literatures on intergenerational transmissions of poverty and inequality suggest that improving schooling attainment and income for parents in poor households will lessen poverty and inequality in their children’s generation through increased human capital accumulated by their children. However, magnitudes of such effects are unknown. We use data on children born in the twenty-first century in four developing countries to simulate how changes in parents’ schooling attainment and consumption would affect poverty and inequality in both the parents’ and their children’s generations. We find that increasing minimum schooling or income substantially reduces poverty and inequality in the parents’ generation but does not carry over to reducing poverty and inequality substantially in the children’s generation. Therefore, while reductions in poverty and inequality in the parents’ generation are desirable in themselves to improve welfare among current adults, they are not likely to have large impacts in reducing poverty and particularly in reducing inequality in human capital in the next generation.