CSAE Working Paper WPS/20 -

I would like to acknowledge and provide my sincere thanks to the Young Lives research group for its generous support of this study, my supervisor Stefan Dercon for his valuable comments and the Rhodes Trust for its sponsorship of my studies. A version of this paper was submitted as an extended essay for the MSc in Economics for Development at the University of Oxford. I can be contacted at andy.david.wheeler@gmail.com

Breaking the Cycle: The Intergenerational Transmission of Human Capital

3rd June 2016

By

Andrew Wheeler The University of Oxford

Abstract

This paper examines the causal effect of parental education on the cognitive and non-cognitive development of children. I find that a parent’s education is a strong determinant of their child’s verbal aptitude, numerical aptitude and educational aspirations. Parents who complete high school rather than just primary school will on average lift their children’s cognitive performance by 24 percentiles in maths, 15 percentiles in vocabulary and 23 percentiles in reading tests. Children of these parents will also aspire to complete two more years of schooling. Somewhat surprisingly, I find that parental education has no impact on children’s self-esteem or self-efficacy. These results are robust to various specifications. I estimate these effects using instrumental variables, taking a change in education policy with differential effects on North Vietnam and South Vietnam as my instrument. The instruments used are relevant and strong, and there is sound cause to believe that they are valid. To my knowledge, this is the first study to derive a causal relationship between parental education and non-cognitive development. It also contributes to a sparse and unsettled literature on the causal relationship between parental education and cognitive development.

JEL codes: I25, I26, I28

Cognitive Development; Non-cognitive Development; Parental Education; Instrumental Variables