Education and Earnings Differentials: The Role of Family Background Across European Countries

The crucial aim of this paper is to investigate, in a generational perspective, the effects of specific dimensions of human capital on individuals earnings and earnings differentials across a selected set of six developed economies of Western Europe with structural differences in their formal education systems and, more generally, in their institutional frameworks. In a cross-country comparison, we intend to inspect how formal education and work experience stand for critical predictors of inequality between and within earner-groups and/or educational groups. In this light, the role of family background on individuals’ earnings in relation to the two main occupational status (i.e., wage-employment rather than self-employment) and, in particular, the impact of parental education and abilities on children’s human capital are argued as well. In order to look into the critical determinants of intergenerational im-mobility, in terms of educational and employment decision-making process, and to what extent they vary across countries, two-stage structural probit models with quantile regressions in the second stage are estimated. As we expect that individual earnings also depend on a range of personal and structural factors and on the family background as well, a set of human capital earnings equations, based on extensions of Mincer models, are estimated by the main employment status. Microdata come from EU-SILC survey, the main new reference source for comparative statistics at European level, which also detects a set of retrospective parental information allowing to account for potential generational changes over time. Briefly, empirical results are interesting, taken as a whole. Although not a few determinants appear to be relatively similar across countries, wider national-specific differentials are drawn. Most of all, it emerges how each component of human capital differently affects individuals’ earnings and earnings inequality across European countries and, most importantly, how this impact differs along the whole earnings distributions. Also, quite dissimilar patterns of influence of family-specific background on children’s outcomes across countries is sketched.