Does Parents' Money Matter?

John Shea , Journal of Public Economics 77(2) , 155-184 , August 2000.

This paper asks whether parents’ income per se has a positive impact on children’s abilities. Previous research has established that income is positively correlated across generations. This does not prove that parents’ money matters, however, since income is presumably correlated with ability. This paper estimates the impact of parents’ income by focusing on income variation due to factors – union, industry, and job loss – that arguably represent luck. I find that changes in parents’ income due to luck have a negligible impact on children’s human capital for most families, although parents’ money does matter for families whose father has low education.

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