Search Results

Source: Department of Economics, New York University
Resulting in 1 citation.
1. Taska, Bledi
The Structure of Early and Higher Education, Dynamic Interactions and Persistent Inequality
Working Paper, Department of Economics, New York University, November 2011
Cohort(s): Children of the NLSY79, NLSY79, NLSY97
Publisher: Department of Economics, New York University
Keyword(s): Armed Forces Qualifications Test (AFQT); Behavior Problems Index (BPI); Census of Population; Earnings; Educational Attainment; Intergenerational Patterns/Transmission; Mobility, Economic; Panel Study of Income Dynamics (PSID); Parental Investments; Peabody Individual Achievement Test (PIAT- Math)

Permission to reprint the abstract has not been received from the publisher.

Intergenerational earnings mobility is a key determinant of the degree of cross-sectional inequality that will be transmitted to future generations. Low intergenerational mobility implies that inequality will be persistent. With income inequality increasing rapidly over the recent years, it is important to understand the underlying sources and mechanisms of intergenerational earnings persistence. This paper examines the mechanisms through which early and higher education (individually and jointly) impact intergenerational earnings mobility. More specifically, I explore the effects that the structure of the education system and existing methods of financing education can have on earnings persistence. In order to quantify these effects, I develop a life-cycle model of incomplete markets where agents differ in wealth, ability, and education. Intergenerational persistence of earnings is generated endogenously as richer parents invest more in the early and higher education of their children. Early education investments affect the cognitive ability of children. Higher ability children earn higher wages, but also have a lower cost of enrolling in college. Higher education investments, through parental transfers, affect college enrollment, college quality and college graduation rates. I use PSID, NLSY, NPSAS, and Census micro data to estimate the parameters of the model. I find that differences in higher education account for a higher percentage of the intergenerational correlation in earnings than do differences in early education. Liquidity constraints do not seem to be important for early or higher education. I also show that there exist complementarities between the two periods of investment in education. Finally, I find that early education is more important for the upward mobility of low income families.
Bibliography Citation
Taska, Bledi. "The Structure of Early and Higher Education, Dynamic Interactions and Persistent Inequality." Working Paper, Department of Economics, New York University, November 2011.