Research explores how fathers pass down income level to sons
THURSDAY, July 13 (HealthDay News) -- A new study suggests that a father's education and training has more to do with whether his son will make the same amount of money than whether his son inherits his wealth.
The research, based on statistics from Sweden, offers more insight into what economists call "human capital" -- the value of people in terms of work based on their various talents and skills. Economists have wondered how much people's human capital is passed down from generation to generation.
"If your goal is to benefit and increase the income in the next generation, the money spent on increasing training and education in the current generation is more effective than just transferring money to people," said study co-author David Sims, an associate professor of economics at Brigham Young University in Provo, Utah.
Connections between the incomes of fathers and daughters, mothers and daughters and mothers and sons are difficult to establish, Sims said, because researchers go back many generations in search of patterns and women then didn't work as much.
Although the role of women will get more of a focus in the future, he said, the current study looked at the issue at hand in men: Through what channels do fathers transmit their higher or lower income to their children?
The researchers examined 35 percent of boys born in Sweden between 1950 and 1965 and their fathers. They also looked at the incomes of the fathers and sons once the sons were adults.
Although Americans may think of the United States as the land of upward mobility, it is actually more difficult to move out of a family's income level here than in Scandinavian countries, Sims said.
Gary Solon, a professor of economics at Michigan State University in East Lansing, put it this way: "Among rich countries, the United States is not particularly mobile, in the sense that the correlation between parents' and offspring's income is relatively high in our country."
Sims and his colleagues found that a father's education and training were better predictors of a son's income level than factors such as inherited income.
The study didn't factor in genetics, Sims said. "We're not able to distinguish human capital due to genetics versus the change in environment that comes from being better educated."
Solon said the research is important "if you care about income inequality."
"It tells us something we ought to know about the nature of income inequality -- how much difference does it make for economic success if one comes from a rich family versus a poor family?" he said.
The study appears in a recent issue of the Journal of Political Economy.
Kids.gov has more on teaching your kids about money (http://kids.usa.gov/grown-ups/for-parents/articles/money-parents/index.shtml ).
SOURCES: David Sims, Ph.D., associate professor, economics, Brigham Young University, Provo, Utah; Gary Solon, Ph.D., professor, economics, Michigan State University, East Lansing; April 2012, Journal of Political Economy