2002

Abstract
One would expect that family income is an important positive factor in the school attainment of children. However, evidence on this relationship is often tainted by the lack of control for parental ability, since at least a portion of ability is transferred genetically to children. This paper uses a sample of adopted children and offers genetically unbiased estimates. We further aim to correct for biases arising from unobserved parenting qualities, parents’ emotional and material differentiation between their own birth and adopted children, and the non-randomness by which adopted children are placed in adopting families. We find that family income still has a significant effect, which is consistent with a causal interpretation. It implies that high-ability children in low-income families face binding credit constraints that society may wish to relieve.

Keywords: Education, income, credit constraint
J.E.L. Classification Number: I21, J24