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The effect of parental wealth on children’s outcomes in early adulthood

Abstract

This paper uses data from the British Household Panel Survey to examine the relationship between parental wealth and three child outcomes in early adulthood. Parental wealth is found to have a very strong positive correlation with children’s degree-level qualification attainment at age 25. This correlation is stronger at below-the-median wealth levels and remains strong after controlling for a wide range of confounding family characteristics. There is also evidence of a positive correlation between parental wealth and children’s employment probability and earnings. However, for both labour market outcomes the parental wealth gradient is rather weak and for the employment outcome the effect is largely mediated by children’s education.

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Acknowledgments

Data for the British Household Panel Survey were made available by the UK Data Archive. The BHPS is copyright Institute of Social and Economic Research (University of Essex, ISER, 2010). Financial support from the Nuffield Foundation and the Growing Inequalities’ Impacts (GINI) research project funded under the EU Socio-Economic Sciences and Humanities theme 7 th Framework Programme is gratefully acknowledged. The author would like to thank John Hills, Frank Cowell, Howard Glennerster and Abigail McKnight and three anonymous referees for useful comments and suggestions and Tom Sefton for the calculation of housing wealth data in the British Household Panel Survey. All errors and ambiguities are the author’s responsibility.

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Correspondence to Eleni Karagiannaki.

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Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

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Karagiannaki, E. The effect of parental wealth on children’s outcomes in early adulthood. J Econ Inequal 15, 217–243 (2017). https://doi.org/10.1007/s10888-017-9350-1

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Keywords

  • Educational attainment
  • Employment
  • Earnings
  • Equality of opportunity
  • Intergenerational transmission
  • Wealth