published in: American Economic Review, 2005, 95 (1), 437-449
Parents with higher education levels have children with higher education levels. However, is
this because parental education actually changes the outcomes of children, suggesting an
important spillover of education policies, or is it merely that more able individuals who have
higher education also have more able children? This paper proposes to answer this question
by using a unique dataset from Norway. Using the reform of the education system that was
implemented in different municipalities at different times in the 1960s as an instrument for
parental education, we find little evidence of a causal relationship between parents’
education and children’s education, despite significant OLS relationships. We find 2SLS
estimates that are consistently lower than the OLS estimates with the only statistically
significant effect being a positive relationship between mother's education and son's
education. These findings suggest that the high correlations between parents’ and children’s
education are due primarily to family characteristics and inherited ability and not education
spillovers.
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