Intergenerational transmission of education across three generations

This paper addresses endogeneity biases to provide empirical evidence on the intergenerational transmission of human capital across three generations. The endogeneity of paternal schooling is addressed by the use of a two-fold... [ view full abstract ]

This paper addresses endogeneity biases to provide empirical evidence on the intergenerational transmission of human capital across three generations. The endogeneity of paternal schooling is addressed by the use of a two-fold instrumental variable approach. A natural experimental set up from a regional war that occurred at the beginning of the 20^th century is exploited to instrument years of schooling of the “grand-father” generation whereas wealth at adolescence and sibling’s education serves as an instrument for the education of the “parents” generation. Using a unique Mexican survey that gathers retrospective information on the three generations, the paper first shows that parental education has a significant effect on their children’s education. It also shows that the IV estimate is larger than the OLS estimate, which implies that accounting for endogeneity unveils a larger importance of familiar background (less educational mobility) than ignoring it. This holds true for both the older and the younger pairs of parent-child links in the three generations at hand.