Dad’s Human Capital Decides Son’s Success

A recent study published in the Journal of Political Economy claims that a father’s brain plays a greater role than his money in impacting his son’s success. A father–child relationship is always very special and is known to play a very unique role in shaping the child’s mental health. Children, especially sons, who remember spending quality time with their fathers, have been found to be more capable of handling stress during later life than those who had poorer relationships with their dads.

It now appears that fathers have a lot more to contribute. Sons are always at the receiving end of their dads’ wealth, but research has shown that inheriting good work ethics, and the ability to study, from dads are much more gratifying that inheriting money.

David Sims, economics professor at Brigham Young University and lead investigator of the study, said, 'We know there’s a correlation between fathers’ income and sons’. What's got less attention is the mechanism.We wanted to see if the intergenerational income correlation is due to money - what we can buy for our kids - or if the human capital attributes passed from father to son play a role as well.’

Usually, fathers with higher human capital endowments also had better incomes, so it was difficult and tricky to separate the two factors and decide which had a better impact.

To overcome this problem Professor Sims and his colleagues set up the following statistical model. It consisted of two smart fathers who were similarly skilled and educated. One resides in a town with a robust labour market and higher income while the other father who wasn’t so lucky lives in a town with a depressed labour market and much lower earnings.

If money were the only thing that mattered then the son of the first father would end up with a higher income in comparison to the son of the unlucky father. However, if human capital is the deciding factor, then the two sons are likely to end up with similar incomes.

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For the study, researchers used a very detailed government administrative data on a large sample of Swedish fathers whose sons were born between the years 1950 and 1965. Salary information of fathers and sons and the information on fathers’ human capital such as education and nature of occupation, were gathered.

Sims and his colleagues identified a strong correlation between fathers’ incomes and that of their sons. They then employed a statistical methodology to identify the differences in fathers’ income due to factors other than human capital, like differing labour market conditions. Income differences in the fathers not related to their human capital were found to be weaker predictors of their son’s income.

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'We can conclude that, for the men in our dataset, differing human capital endowments passed from father to son account for about two-thirds of the overall intergenerational income relationship,' Professor Sims said. 'We don’t offer a final answer here, but we do offer some boundary conditions and present a methodology that could help unravel the question, Sims continued.'

Thus money was not found to be the only thing that mattered, human assets mattered a lot too, in deciding progeny’s success.

Reference:
http://www.dailymail.co.uk/sciencetech/article-2163117/Inheriting-father-s-brains-strong-work-ethic-better-receiving-money.html?ITO=1490

Source-Medindia