Equal Opportunity for All? Parental Economic Resources and Children’s Educational Achievement

We investigate the relationship between parents’ economic resources and children’s educational attainment and test the liquidity constraint hypothesis, using data from the Panel Study of Income Dynamics. We pay special attention to parents’ assets and compare two cohorts. We find that parents’ net worth, liquid assets, and home ownership have significantly positive relationships with children’s high school graduation and college enrollment when controlling for family income, other household characteristics, and cognitive skill indicators, although asset effects are weaker for college graduation. We also find that the relationship between liquid assets and education is non-linear: among the more recent of two cohorts studied, children from negative liquid asset households have a higher chance of finishing high school but a lower chance of graduating college than those from zero liquid asset households. Results suggest that we should consider assets as well as income when seeking to understand educational mobility.