Intergenerational poverty transmission in Europe: The role of education

This paper examines the role of education as causal channel through which growing up poor affects the individual’s economic outcomes as an adult. We contribute to the literature on intergenerational transmission in two ways. First, we apply a potential outcomes approach to quantify the impact of experiencing poverty while growing up and we provide a sensitivity analysis on the unobserved parental ability. Second, we analyze the role of individual human capital accumulation as an intermediate variable and we provide a sensitivity analysis on further possible unobserved confounders. The analysis is based on the module on intergenerational transmission of 2011 of the EU-SILC data, where retrospective questions about parental characteristics (such as education, age, occupation) were asked. We find that, on average, over the 27 European countries considered, growing up poor leads to an increase of 4 percentage points in the risk of being poor and to a decrease of 5% in the adult equivalent income. Moreover, we find that experiencing poverty during childhood will more likely translate into an exclusion from secondary education (of 12 percentage points on average) and that education plays indeed a substantial role accounting for almost 35% of the total effect on adult income.