Do borrowing constraints matter for intergenerational educational mobility? Evidence from Japan*

Abstract

This paper examines the intergenerational transmission of educational attainment using microdata for Japan. By exploiting unique information on whether children have ever given up schooling for financial reasons and, if they have, which level of schooling they have forgone, it assesses the role of borrowing constraints in determining intergenerational educational mobility in a more direct manner than previous attempts. Despite a steady increase in the level of educational attainment, the regression results indicate the absence of an increase in intergenerational educational mobility in postwar Japan. Moreover, while borrowing constraints used to play a significant role in lowering intergenerational educational mobility, they no longer seem to matter for the youngest cohort examined in this paper. Instead, our analysis shows that the relative importance of adolescent academic ability for children’s educational attainment has increased in recent years, thereby underlining the increasing importance of earlier investments in children’s human capital for their subsequent academic advancement.