Does the apple fall far from the tree? Inequality in education and labour market outcomes when households are uncertain about children’s abilities

A large body of research has documented that children of highly educated and high-income parents tend to achieve higher levels of education and income as adults than children of less educated and lower-income parents. However, the reasons behind these relationships are not yet fully understood.

This project investigates whether uncertainty about children’s abilities can help explain the link between parents’ and children’s education and income. The starting point is that both children and parents gradually learn about the child’s abilities, but that this process takes time and is characterised by uncertainty. Early on, both may assume that the child’s abilities are similar to the parents’. This can lead children with the same actual ability, but with different parents, to choose different educational and career paths.

To analyse the relationship between children’s and parents’ education and income, the researchers use Swedish register data to estimate a dynamic model of education and occupational choice.