Parental Education, Income and Child’s Education

We investigate the relationship between early school-leaving and parental education
and paternal income using UK Labour Force Survey data. OLS estimation reveals
modest effects of income, stronger effects of maternal education relative to paternal,
and stronger effects on sons than daughters. Using IV to simultaneously model the
endogeneity of parental education and income, the maternal education effect
disappears, while paternal education remains significant but only for daughters. In
our favourite specification, which proxy for permanent income, paternal income
becomes insignificant. Thus policies alleviating income constraints to alter schooling
decisions may not be as effective as policies which increase permanent income.