Human Capital Development and Inter-Generational Income Mobility

Abstract

Two Models are developed to analyze how would human capital development and inter-generational income mobility be affected when cognitive skills are differentiated from non-cognitive skills and multistage development are considered. The close link between human capital of children and parents would still be present although parenting skills are uncorrelated with parental incomes.Inter-generational income mobility would be lower if parenting skills and the quality of public education (which is assumed to be free and equally accessed by every individual till late childhood) are higher due to dynamic complementary effect in the process of multistage development. In the presence of strong impact of parents’ traits on both cognitive and non-cognitive skills of children, the relationship between human capital of parents and that of children becomes much complicated, so would be the analysis of inter-generational income mobility and poverty trap as now both composition and level of parent’s human capital matter.