Intergeneration Transfer of Human Capital: Results from a Natural Experiment in Taiwan

We exploit a natural experiment to estimate the causal impact of parental education on educational outcomes of their children when they are high school seniors. In 1968, the Taiwanese government extended compulsory education from 6 to 9 years and opened over 150 new junior high schools at a differential rate among regions. We form treatment and control groups of women or men who were age 12 or under on the one hand and between the ages of 13 and 25 on the other hand in 1968. Within each region, we exploit variations across cohorts in new junior high school openings to construct an instrument for schooling. We employ this instrument to estimate the causal effects of mother's and father's schooling on their child's college entrance examination test scores in the years 2000-2003, on the probability that the child attended college and on the rank of the college attended. The schooling of each parent does cause their child to experience better educational outcomes. A one-year increase in the schooling of either parent raises the probability that the child attends one of the top six colleges in Taiwan by approximately 10 percent.