Abstract
Purpose This paper aims to study the effect of family socioeconomic status (SES) on academic and labor market outcomes. Design/methodology/approach The authors used a rich data set of administrative records for test scores, individual background and adult earnings of a cohort of agents, covering a period spanning the agents' upper-secondary education and their early years in the labor market. Findings The authors find that students with the highest SES obtained a 1.5 standard deviations higher score in the college admission test than students who had the same academic outcomes in the eighth grade test but belong to the lowest SES. Similarly, among students that obtained the same scores in the college admission test, those with the highest SES earned monthly wages 0.7 standard deviations higher than those with the lowest SES. Originality/value The findings highlight that family socioeconomic background continues to influence outcomes during individuals’ upper secondary education and early years in the labor market.
Highlights
Economic inequality has been on the rise in several regions of the world (Piketty, 2014)
We find that the effect of socioeconomic status (SES) on outcomes over the period spanning agents’ upper-secondary education and early years in the labor market persists within school type, academic achievement quintile and gender
Using reduced-form regressions, we find that among agents with the same stock of human capital in their upper secondary education, those with the highest SES perform better on the college admission test and earn higher wages in their early years in the labor market
Summary
Economic inequality has been on the rise in several regions of the world (Piketty, 2014). Empirical evidence documents a significant influence of family socioeconomic background on the probable economic status of the generation (Solon, 1992, 1999, 2002; Zimmerman, 1992). Most of the literature points to the influence of parental background on children’s human capital formation (Becker and Tomes, 1979, 1986)[1]. Some of the channels highlighted in the literature through which family background affects the skill formation of children are as follows: financial constraints (Becker and Tomes, 1979, 1986), peer effects (Benabou, 1996), educational policies (Schuetz et al, 2008), non-cognitive skills (Bowles and Gintis, 2002) and educational investments at early stages of life (Cunha and Heckman, 2007)
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