The Intergenerational Transmission of Human Capital

University Of California-Davis, Davis CA

Investigators

Abstract

ABSTRACT PROPOSAL NO: 0350988 INSTITUTION: University of California, Davis NSF PROGRAM: ECONOMICS PI: Page, Marianne TITLE: The Intergenerational Transmission of Human Capital There is a high degree of persistence in economic status across generations, but very little is known about the causal processes behind this phenomenon. This research project will investigate the causal effects of parental education on children's education and labor market outcomes. The project is that it will lead to a better understanding of the causal processes that contribute to intergenerational immobility. Quantifying the extent to which a child's well being can be improved by increasing his parent's education level will shed light on the debate over whether similarities across generations result from "nature vs. nurture". Discussions about the government's role in providing educational aid focus on the individual's return to education and ignore the possibility of social benefits. Knowing that there are intergenerational returns to increased schooling would provide a further rationale for such programs. Very few studies have attempted to isolate the causal effect of education on the next generation's well being. This is probably due, partly, to difficulty in finding plausible sources of identifying variation as well as finding large, nationally representative datasets that simultaneously provide information on parental characteristics and children's outcomes. The Census Bureau's IPUMS and data on compulsory schooling will be sources of data for this study. The first source of identification is variation in state compulsory schooling and child labor laws across cohorts and over time. Between 1915 and 1969 48 states changed these laws, and many changed them multiple times. If these laws lead people to get more schooling, and if parental education has a positive effect on the next generation's schooling then the children of individuals who grew up in states with later drop-out ages should have higher measures of human capital. The second source of identification comes from variation induced by the World War II G.I. Bill, together with variation across cohorts in the probability of taking up G.I. benefits. These benefits have a substantive effect on collegiate attainment and there were differences in the probability of GI take-up across cohorts. Compared to younger veterans older veterans would have been more likely to have completed their schooling before being drafted, had fewer years over which to recoup the gains, and would more likely to have had a pre-existing job that was held for them. They were thus less likely to take advantage of the G.I. program. Since these differences are generated only by differences in age, however, it is unlikely that they would have an independent effect on children's outcomes. This research will also be the first to focus on causality using a large, nationally representative dataset. The results of this research are likely to increase our understanding of the intergenerational transmission of human capital.