Now showing 1 - 10 of 18
  • Publication
    The (Un)Importance of Inheritance
    (University College Dublin. School of Economics, 2022-01) ; ; ;
    Transfers from parents—either in the form of gifts or inheritances—have received much attention as a source of inequality. This paper uses a 19-year panel of administrative data for the population of Norway to examine the share of the Total Inflows available to an individual (defined as the capitalized sum of net labor income, government transfers, and gifts and inheritances received over the period) accounted for by capitalized gifts and inheritances. Perhaps surprisingly, we find that gifts and inheritances represent a small share of Total Inflows; this is true across the distribution of Total Inflows, as well as at all levels of net wealth at a point in time. Gifts and inheritances are only an important source of income flows among those who have very wealthy parents. Additionally, gifts and inheritances have very little effect on the distribution of Total Inflows – when we do a counterfactual Total Inflows distribution with zero gifts and inheritances, it is not much different from the actual distribution. Our findings suggest that inheritance taxes may do little to mitigate the extreme wealth inequality in society.
      246
  • Publication
    The more the merrier? The effect of family composition on children's education
    (Institute for the Study of Labor, 2004-08) ; ;
    Among the perceived inputs in the “production” of child quality is family size; there is an extensive theoretical literature that postulates a tradeoff between child quantity and quality within a family. However, there is little causal evidence that speaks to this theory. Our analysis is able to overcome many limitations of the previous literature by using a rich dataset that contains information on the entire population of Norway over an extended period of time and allows us to match adult children to their parents and siblings. In addition, we use exogenous variation in family size induced by the birth of twins to isolate causation. Like most previous studies, we find a negative correlation between family size and children’s educational attainment. However, when we include indicators for birth order, the effect of family size becomes negligible. This finding is robust to the use of twin births as an instrument for family size. In addition, we find that birth order has a significant and large effect on children’s education; children born later in the family obtain less education. These findings suggest the need to revisit economic models of fertility and child “production”, focusing not only on differences across families but differences within families as well.
      356
  • Publication
    Understanding Intergenerational Mobility: The Role of Nature versus Nurture in Wealth and Other Economic Outcomes and Behaviors
    (University College Dublin. School of Economics, 2019-02) ; ; ;
    Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for pre-birth factors and we find little evidence that nature/nurture interactions are important. When bequests are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth. We further build on the existing literature by providing a more comprehensive view of the role of nature and nurture on intergenerational mobility, looking at a wide range of different outcomes using a common sample and method. We find that environmental influences are relatively more important for wealth-related variables such as savings and investment decisions than for human capital. We conclude by studying consumption as an overall measure of welfare and find that, like wealth, it is more determined by environment than by biology.
      532
  • Publication
    Under pressure? The effect of peers on outcomes of young adults
    (University College Dublin. School of Economics, 2010-05) ; ;
    A variety of public campaigns, including the “Just Say No” campaign of the 1980s and 1990s that encouraged teenagers to “Just Say No to Drugs”, are based on the premise that teenagers are very susceptible to peer influences. Despite this, very little is known about the effect of school peers on the long-run outcomes of teenagers. This is primarily due to two factors: the absence of information on peers merged with long-run outcomes of individuals and, equally important, the difficulty of separately identifying the role of peers. This paper uses data on the population of Norway and idiosyncratic variation in cohort composition within schools to examine the role of peer composition in 9th grade on longer-run outcomes such as IQ scores at age 18, teenage childbearing, post-compulsory schooling educational track, adult labor market status, and earnings. We find that outcomes are influenced by the proportion of females in the grade, and these effects differ for men and women. Other peer variables (average age, average mother’s education) have little impact on the outcomes of teenagers.
      633
  • Publication
    Older and wiser? Birth order and IQ of young men
    (Institute for the Study of Labor, 2007-08) ; ;
    While recent research finds strong evidence that birth order affects children’s outcomes such as education and earnings, the evidence on the effects of birth order on IQ is decidedly mixed. This paper uses a large dataset on the population of Norway that allows us to precisely measure birth order effects on IQ using both cross-sectional and within-family methods. Importantly, irrespective of method, we find a strong and significant effect of birth order on IQ, and our results suggest that earlier born children have higher IQs. Our preferred estimates suggest differences between first-borns and second-borns of about one fifth of a standard deviation or approximately 3 IQ points. Despite these large average effects, birth order only explains about 3% of the within-family variance of IQ. When we control for birth endowments, the estimated birth order effects increase. Thus, our analysis suggests that birth order effects are not biologically determined. Also, there is no evidence that birth order effects occur because later-born children are more affected by family breakdown.
      754
  • Publication
    Small family, smart family? Family size and the IQ scores of young men
    (Institute for the Study of Labor, 2007-08) ; ;
    How do families influence the ability of children? Cognitive skills have been shown to be a strong predictor of educational attainment and future labor market success; as a result, understanding the determinants of cognitive skills can lead to a better understanding of children’s long run outcomes. This paper uses a large dataset on the male population of Norway and focuses on one family characteristic: the effect of family size on IQ. Because of the endogeneity of family size, we instrument for family size using twin births and sex composition. IV estimates using sex composition as an instrument show no negative effect of family size; however, IV estimates using twins imply that family size has a negative effect on IQ. Our results suggest that effect of family size depends on the type of family size intervention. We conclude that there are no important negative effects of expected increases in family size on IQ but that unexpected shocks to family size resulting from twin births have negative effects on the IQ of existing children.
      371
  • Publication
    Does grief transfer across generations? In-utero deaths and child outcomes
    (University College Dublin. School of Economics, 2014-03) ; ;
    While much is now known about the effects of physical health shocks to pregnant women on the outcomes of the in-utero child, we know little about the effects of psychological stresses. One clear form of stress to the mother comes from the death of a parent. We examine the effects of the death of the mother's parent during pregnancy on both the short-run and the long-run outcomes of the infant. Our primary specification involves using mother fixed effects— comparing the outcomes of two children with the same mother but where a parent of the mother died during one of the pregnancies—augmented with a control for whether there is a death around the time of the pregnancy in order to isolate true causal effects of a bereavement during pregnancy. We find small negative effects on birth outcomes, and these effects are bigger for boys than for girls. The effects on birth outcomes seems to be driven by deaths due to cardiovascular causes suggesting that sudden deaths are more difficult to deal with. However, we find no evidence of adverse effects on adult outcomes. The results are robust to alternative specifications.
      398
  • Publication
    Why the apple doesn't fall far : understanding intergenerational transmission of human capital
    (Institute for the Study of Labor, 2003-10) ; ;
    Parents with higher education levels have children with higher education levels. However, is this because parental education actually changes the outcomes of children, suggesting an important spillover of education policies, or is it merely that more able individuals who have higher education also have more able children? This paper proposes to answer this question by using a unique dataset from Norway. Using the reform of the education system that was implemented in different municipalities at different times in the 1960s as an instrument for parental education, we find little evidence of a causal relationship between parents’ education and children’s education, despite significant OLS relationships. We find 2SLS estimates that are consistently lower than the OLS estimates with the only statistically significant effect being a positive relationship between mother's education and son's education. These findings suggest that the high correlations between parents’ and children’s education are due primarily to family characteristics and inherited ability and not education spillovers.
      615
  • Publication
    Poor Little Rich Kids? - The Determinants of the Intergenerational Transmission of Wealth
    (University College Dublin. School of Economics, 2015-07) ; ; ;
    Wealth is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use administrative data on the net wealth of a large sample of Swedish adoptees merged with similar information for their biological and adoptive parents. Comparing the relationship between the wealth of adopted and biological parents and that of the adopted child, we find that, even prior to any inheritance, there is a substantial role for environment and a much smaller role for genetics. We also examine the role played by bequests and find that, when they are taken into account, the role of adoptive parental wealth becomes much stronger. Our findings suggest that wealth transmission is not primarily because children from wealthier families are inherently more talented or more able but that, even in relatively egalitarian Sweden, wealth begets wealth.
      561
  • Publication
    On The Origins of Risk-Taking
    (University College Dublin. School of Economics, 2015-06) ; ; ;
    Risk-taking behavior is highly correlated between parents and their children; however, little is known about the extent to which these relationships are genetic or determined by environmental factors. We use data on stock market participation of Swedish adoptees and relate this to the investment behavior of both their biological and adoptive parents. We find that stock market participation of parents increases that of children by about 34% and that both pre-birth and post-birth factors are important. However, once we condition on having positive financial wealth, we find that nurture has a much stronger influence on risk-taking by children, and the evidence of a relationship between stock-holding of biological parents and their adoptive children becomes very weak. We find similar results when we study the share of financial wealth that is invested in stocks. This suggests that a substantial proportion of risk-attitudes and behavior is environmentally determined.
      197