Parental income and the achievement of higher education in Sweden and Finland

Abstract

<p>This study examines how parental income influences the likelihood that a child attains<br>higher education in Sweden and Finland. Recognizing that both parental income and<br>children's educational outcomes may be shaped by unobserved factors, we exploit<br>variation in local labour market conditions—particularly during the economic recessions of<br>the early 1990s—to identify the causal effects of childhood economic resources on later<br>educational attainment. Using high-quality register data covering the years 1987 to 2020,<br>we apply both instrumental variables and sibling fixed-effects approaches to address<br>endogeneity concerns and account for family-level unobserved heterogeneity. Our findings<br>suggest that parental economic resources play a significant role in shaping children's<br>educational outcomes. However, the strength of the association varies depending on the<br>measure of parental resources considered. Causal estimates derived from instrumental<br>variables tend to be larger than naive ordinary least squares estimates, indicating that<br>simple correlations may underestimate the true effects. Moreover, parental labour income<br>appears to be more consistently associated with children's educational attainment than<br>disposable household income, suggesting the importance of parental labour market<br>attachment beyond financial resources alone. Some evidence also points to maternal<br>income exerting a stronger influence than paternal income, although results differ by<br>country and specification. Overall, our results highlight the critical role of dynamic changes<br>in family economic conditions during childhood in shaping intergenerational educational<br>mobility<br></p>