Parents, Patience, and Persistence: A Novel Theory of Intergenerational College Attainment

We present a novel theory of intergenerational persistence in college attainment that does not rely on credit constraints, parental transfers and investments, or persistence in innate ability. The gist of our theory is heterogeneity in time preferences, which are endogenous since parents can teach patience to their children before the children make their college decisions. We show, analytically, that the most patient parents are simultaneously more likely to have a college degree and to educate their children to be patient. Persistence follows. We also show that persistence occurs if and only if there is persistence in patience. So, our model rationalizes the view that long-run family factors matter for educational attainment. We embed our theory in a general equilibrium model which we calibrate to U.S. data. The model matches both college persistence and cross sectional inequality moments. We implement a policy experiment in which a college subsidy is financed via a proportional tax on labor income. The policy distorts intertemporal trade-offs and, hence, affects people differently depending on their patience. We find that the policy raises overall college attainment (individuals earn a BA) and its persistence. Specifically, it raises the likelihood of attaining a BA for individuals whose parents have a BA and it lowers that likelihood for individuals whose parents do not have a BA. This result differs from that of the existing literature where college subsidies alleviate borrowing constraints and tend to reduce intergenerational persistence.