Understanding the Effect of Parental Education and Financial Resources on the Intergenerational Transmission of Income

Aiday Sikhova

Journal of Labor Economics, 2023, vol. 41, issue 3, 771 - 811

Abstract: There are two essential mechanisms in the canonical model of the transmission of income across generations—parents’ financial resources and parental education. I provide novel empirical evidence to disentangle the significance of these two mechanisms in explaining the intergenerational transmission of income. Utilizing two reforms and administrative data from Sweden, I find that parents’ financial resources amount to about 25% of the effect of parental education on children’s income. Additionally, I show that parents’ financial resources matter less for sons. Overall, my findings suggest a comparatively modest impact of parental financial resources on children’s income.

Date: 2023
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