![]() Blau (1999) uses child fixed effects in the National Longitudinal Study of Youth data and finds that parental income (at least the transitory component) does not affect child test scores. Mayer (1997) uses household assets and child support payments as measures of household income (these are taken to be less closely related to parental characteristics) and she finds that income has a positive and significant effect on educational attainment and wages. Other researchers have used more permanent income measures such as household assets. ![]() Finally, in the oil boom scenario we must assume no endogenous movement across regions but also that all industries within the affected regions were not differentially affected. Alternatively, we must assume that there is no transmission of abilities across generations for the grandparent socioeconomic instrument to be valid. For these instruments to be valid, we must assume that there is no choice involved in union or occupational status or selection in the job loss instruments. ![]() She finds that there is no effect of family income on child educational attainment. Loken (2007) uses the Norwegian oil boom of the 1970's and 1980's, which only affected a few regions of the country, as an instrument for increases in household income that is unrelated to parental characteristics. He finds that a child is much less likely to be held back in school the higher the household income. Maurin (2002) uses grandparent socioeconomic status as a predictor of parental incomes which is then used to explain a child's performance in early education. (2005) finds that permanent income matters in children's educational attainment. Using father's union and occupational status as instruments for income, Shea (2000) finds that income has no effect on child outcomes while Chevalier et al. Researchers have sought to overcome this endogeneity problem by using a number of instrumental variables and fixed effects techniques that attempt to isolate the difference in household incomes that are not due to parental characteristics or ability. Parents transmit to their genetic offspring some of their innate abilities and the observed correlation between parental incomes and child outcomes later in life may simply re‡ect this intergenerational transfer and not the effect of income per se. Therefore, simply observing that children from high (low) income families tend to have positive (negative) educational, income and employment outcomes in young adulthood tells us little about the actual causation. Income depends crucially on parental characteristics, both observed and unobserved. Does having more money in the household produce better child outcomes over time? Alternatively, does growing up in poverty produce worse outcomes for children? It is difficult to answer these questions because household incomes are not exogenously given. One characteristic is of special importance for economists –household incomes. ![]() The strength and nature of that role has been an important research area for social scientists. ![]() Household conditions and characteristics play an important role in determining the outcomes of children. ![]()
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