Parents, Patience, and Persistence: A Novel Theory of Intergenerational College Attainment

David Fuller and Guillaume Vandenbroucke

No 2025-003, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We present a theory of intergenerational persistence in college attainment (a Bachelor's degree, BD) guided by two well-documented empirical regularities: (i) patient individuals are more likely to be college graduates and (ii) patience persists across generations because parents choose to transmit it to their children, among other non-cognitive traits. To the best of our knowledge, we are the first to formalize and evaluate these mechanisms in a general equilibrium model. In the model, (i) and (ii) are endogenous outcomes implying college persistence. "Standard mechanisms," i.e., credit constraints, parental investments, or exogenous persistence in cognitive ability are not necessary. Theoretically, we characterize the conditions for college persistence and show that patience persistence is necessary for college persistence. Empirically, the baseline model without ability persistence, calibrated to U.S. data, matches college persistence and cross sectional inequality moments while accounting for 30% of earnings persistence. An augmented model, with exogenous ability persistence, reveals that ability persistence accounts for 80% of earnings persistence and 10% of college persistence. The remainder of college persistence is accounted for by endogenous persistence in patience. Ability persistence in the augmented model is a reduced form for the combined effects of the standard mechanisms. So, our finding that the standard mechanisms matter for earnings persistence is in line with the literature, while our finding that they matter little for college persistence, once patience is modeled, is new. We implement a policy experiment in which a college subsidy is financed via a proportional tax on labor income. The policy distorts intertemporal trade-offs and, hence, affects people differently depending on their patience. Overall college attainment and its persistence increase. Specifically, the policy raises the likelihood of a BD for individuals whose parents have a BD and it lowers that likelihood for individuals whose parents do not have a BD. This result differs from that of the existing literature where college subsidies alleviate credit constraints and reduce persistence.

Keywords: endogenous preferences; intergenerational persistence; inequality; college choice (search for similar items in EconPapers)
JEL-codes: E6 I2 J62 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2025-02-03, Revised 2025-08-13
New Economics Papers: this item is included in nep-dge and nep-lab
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DOI: 10.20955/wp.2025.003

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