The role of paternal risk attitudes in long-run education outcomes and intergenerational mobility

Abstract

This paper studies the role of paternal risk attitudes in sons’ long-run education outcomes and in the intergenerational transmission of incomes and education. Based on 1984–2012 German Socio-Economic Panel Study data of sons and fathers, I show that fathers’ risk aversion is inversely related to sons’ long-run levels of education. A quasi-experimental setting provides no evidence for reverse causality. I find signs that sons with risk averse fathers experience lower educational mobility and considerably lower income mobility than their peers with risk taking fathers, though these differences can only be measured with large standard errors. The direct link between paternal risk attitudes and offspring’s education outcomes can provide a novel explanation for the mechanism underlying the intergenerational persistence of economic statuses. It can further challenge the traditional view of own risk attitudes in the human capital investment theory and suggests that parental risk attitudes should be incorporated.