Direct and Indirect Influences of Parental Background on Children's Earnings: A Comparison across Countries and Genders

Abstract

The association between parental occupation and children's earnings in eight EU countries is compared using the European Union Survey on Income and Living Conditions (EU-SILC) data set, analysing: (i) residual background correlations (RBCs) on earnings, controlling for children's education and occupation, and (ii) patterns by gender, controlling for selection into employment. Findings on cross-country differences confirm well-known differences in intergenerational income inequality. RBCs are statistically significant irrespective of gender in the UK, Spain and Italy, for men in France and Ireland, for women in Denmark and not significant in Germany and Finland. Not controlling for selection delivers downward biased estimates of RBCs, highlighting the effect of family background on employability.