Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2012:1: Transmission of Human Capital across Four Generations: Intergenerational Correlations and a Test of the Becker-Tomes Model

Mikael Lindahl (), Mårten Palme (), Sofia Sandgren Massih () and Anna Sjögren ()
Additional contact information
Mikael Lindahl: Dept. of Economics, Uppsala University, CESifo, IFAU, IZA and UCLS, Postal: Department of Economics, Uppsala University, SE-751 20 Uppsala, Sweden
Mårten Palme: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Sofia Sandgren Massih: Dept. of Economics, Uppsala University, Postal: Department of Economics, Uppsala University, SE-751 20 Uppsala, Sweden
Anna Sjögren: IFAU and SOFI Stockholm University, Postal: IFAU, Box 513, SE-751 20 Uppsala, Sweden

Abstract: Most previous studies on intergenerational transmission of human capital are restricted to two generations - between the parent and the child generation. In this paper we investigate if there is an independent effect of the grandparent and the great grandparent generations in this process. We use a dataset where we are able to link individual measures of life time earnings for three generation and data on educational attainments of four generations. We first do conventional regressions and transition matrices for life time earnings measures and educational attainments adding variables for the grandparent and great grandparent generations, respectively. We find that grandparents and even great grandparents significantly influence earnings and education. We then estimate the so called Becker-Tomes model using the educational attainment of the great grandparent generation as an instrumental variable. We fail to find support for the model’s predictions.

Keywords: Intergenerational income mobility; earnings distribution; income inequality

JEL-codes: D31; J62

27 pages, December 18, 2011

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