A multi-group structural equation model (SEM) examining asset holding effects on educational attainment by race and gender

Abstract

Little is known about the processes through which parents' and children's wealth may influence children's math and reading scores. Even less is known about how these processes may vary across race and gender. In this study we analyze Panel Study of Income Dynamics (PSID) data using multi-group structural equation modeling (SEM) to examine wealth effects by gender (male/female) and race (white/black). Results suggest that there are important statistical differences across race and gender. For example, we find that children's school savings predict math scores among white children but not black children. Net worth is a positive predictor of black males' math scores but a negative predictor of black females'. In the case of income, we find that it is directly related to black females' math scores but not black males'. In general, findings suggest that liquid forms of wealth (i.e., forms of wealth that are easily converted into cash) may be better predictors of children's academic achievement than net worth.