Intergenerational Transmission of Poverty and Inequality: Young Lives

Working paper number
13-03
Publication Year
2013
Authors
Benjamin T. Crookston
Kirk Dearden
Le Thuc Duc
Lia C. H. Fernald
Subha Mani
Whitney Schott
Aryeh D. Stein
Paper Abstract
Parents play major roles in determining the human capital of children, and thus the income of
children when they become adults. Models of investments in children’s human capital posit that these
investments are determined by parental resources (financial and human capital) and child endowments
within particular market and policy environments. Many empirical studies are consistent with significant
associations between parental resources and investments in their children. And there is considerable
emphasis in the scholarly and the policy literatures on the degree of intergenerational mobility and the
intergenerational transmission of economic opportunities, and therefore the intergenerational
transmission of poverty – or of affluence. Therefore policies or other developments that affect the
extent of poverty and/or inequality in the parents’ generation are likely to have impacts on the extent of
poverty and/or inequality in the children’s generation. However the extent of these intergenerational
effects is an empirical question that this paper explores using the Young Lives data to estimate
intergenerational associations between parental resources and investments in human capital of children
and then, under the assumption that these associations reflect causal effects, to simulate what impacts
changes in poverty and inequality in the parents’ generation have on poverty and inequality in the
children’s generation. The results suggest that reductions in poverty and in inequality in the parents’
generation reduce poverty and inequality in the children’s generation some, but not much.