Family income and educational attainment: A review of approaches and evidence for Britain

Abstract

It is widely recognized that, on average, children from poorer backgrounds have worse educational outcomes than their better-off peers. There is less evidence on how this relationship has changed over time and, indeed, what exactly leads to these inequalities. In this paper we demonstrate that the correlation between family background (as measured by family income) and educational attainment has been rising between children born in the late 1950s and those born two decades later. We then consider the extent to which these associations are due to the causal effects of income rather than the result of other dimensions of family background. We review the approaches taken to answering this question, drawing mainly on the US literature, and then present our own evidence from the UK, discussing the plausible range for the true impact of income on education. Our results indicate that income has a causal relationship with educational attainment. © Oxford University Press and the Oxford Review of Economic Policy Limited 2004; all rights reserved.