Claire Crawford
© Institute for Fiscal Studies

• UK has relatively low intergenerational mobility
– Correlation between parents and children’s income is relatively high
– Intergenerational elasticity of 0.29 for those born in Britain in 1970
(Blanden et al, 2005)
– Circumstances into which you are born heavily influence future income
• Government would like to improve life chances of children in poverty
– Child Poverty Act (2010)
– Review on Poverty and Life Chances
© Institute for Fiscal Studies

• If the link between income across generations is causal , then increasing parents’ incomes today should lead to higher income for their children in future
• Of course parental income may not be the only factor that is causally related to children’s future income (or well-being)
– Other family background characteristics (e.g. Parents’ education, marital status)
– Other factors (e.g. Health) – not dealt with today
© Institute for Fiscal Studies

• What do we mean by causal ?
– Certainty that changing a particular factor of interest causes (rather than is simply correlated with) a change in the outcome of interest
• Important distinction, because we really only want to base policy decisions on causal (rather than correlational) relationships
© Institute for Fiscal Studies

• If the link between income across generations is causal , then increasing parents’ incomes today should lead to higher income for their children in future
• Of course parental income may not be the only family background characteristic that is causally related to children’s future income
– Others include parents’ education and marital status
© Institute for Fiscal Studies

• Can be difficult to find evidence of direct causal relationships between (e.g.) parent and child income, not least because of need for long time lags between observations
• Can instead piece together evidence in two stages:
– Establish causal links between outcomes in childhood and later in life
– Establish causal links between parental income (and other family background characteristics) and child outcomes
© Institute for Fiscal Studies

• Evidence of causal relationship between children’s educational attainment and their future income
– e.g. Blundell et al (1999) suggest that the gross rate of return to an additional year’s education in the UK is 5-10%
• Also some evidence of causal link between childhood cognitive and non-cognitive skills and a range of adult outcomes
– e.g. Heckman et al (2006) for the US; Carneiro et al (2008) for the
UK
• Suggests improving educational attainment and skills amongst poor children is key to improving future labour market outcomes
–
Other outcomes also relevant for wider well-being, e.g. health
© Institute for Fiscal Studies

• Some evidence of causal relationship between parental income and children’s educational attainment
– e.g. Blanden & Gregg (2004) suggest that a one third fall in household income (around £7,000) reduces the probability of getting a degree by around 5 percentage points (ppts)
– e.g. Chevalier et al (2005) suggest that a doubling of father’s income increases the likelihood of post-compulsory education by 14 ppts
– Suggests that policies which focus on increasing parents’ income are likely to improve children’s life chances - although such sizeable income changes may be beyond the scope of policymakers to provide
© Institute for Fiscal Studies

• Also of causal link between parents’ and children’s education
– e.g. Chevalier (2004) suggests that each additional year of parental education increases the probability of staying on in post-compulsory education by up to 8 ppts (although estimates are insignificant)
– Chowdry et al (2008) also suggest that parental education increases
GCSE attainment (although again estimates are insignificant)
– Suggests that improving educational attainment amongst today’s children will also have benefits for the next generation
© Institute for Fiscal Studies

• What about other family background characteristics?
• Evidence from UK and elsewhere that children born to married parents have better cognitive and behavioural outcomes than children born to cohabiting parents
– Conservatives’ proposal to support marriage through the tax system presumably based on such evidence
• But do these gaps reflect a causal effect of marriage on child outcomes? Or do they simply reflect the fact that different sorts of people choose to get married (selection effect)?
– Recent IFS research tries to shed light on this issue . . .
© Institute for Fiscal Studies

0,2
0,1
0
-0,1
-0,2
-0,3
-0,4
BAS (age 3) BAS (age 5) SDQ (age3)
Cohabiting Married Difference
SDQ (age 5)
© Institute for Fiscal Studies

Cognitive development at age 3
1
0,75
0,5
0,25
0
Mother high vs low education
White vs nonwhite
Top vs bottom income quintile
Father professional vs routine occupation
Lone parents vs any couple
Married vs cohabiting
© Institute for Fiscal Studies

Social and emotional development at age 3
1
0,75
0,5
0,25
0
Education Income Occupation Lone parenthood
Married vs cohabiting
White vs nonwhite
© Institute for Fiscal Studies

• What about other family background characteristics?
• Evidence from UK and elsewhere that children born to married parents have better cognitive and behavioural outcomes than children born to cohabiting parents
• Conservatives’ proposal to support marriage through the tax system presumably based on such evidence
• But do these gaps reflect a causal effect of marriage on child outcomes? Or do they simply reflect the fact that different sorts of people choose to get married (selection effect)?
–
Recent IFS research tries to shed light on this issue . . .
© Institute for Fiscal Studies

• To provide a best estimate of the causal impact of marriage on child outcomes by eliminating that part of the gap due to selection
– i.e. take account of the fact that people who choose to get married are different from those who do not
• Interpret the remaining gap as the causal effect of marriage
• Need to strike a careful balance in terms of controls:
– “Over-control” and you risk under-estimating the effect of marriage
– “Under-control” and you risk over-estimating the effect of marriage
© Institute for Fiscal Studies

• Millennium Cohort Study
• We use a sample of around 10,000 children, born to married or cohabiting couples (i.e. we exclude lone parents)
• Marital status measured at birth
– 70% married; 30% cohabiting
• Outcomes:
– Cognitive development measured using vocabulary component of
British Ability Scales (BAS) at ages 3 and 5
– Social and behavioural development measured using motherreported Strengths and Difficulties Questionnaire (SDQ) at ages 3 and 5
© Institute for Fiscal Studies

• Three key groups of variables:
Reflect sort of person that chooses to get married
Group 1
Very likely
Group 2
Likely
Group 3
Possible
Affected by marriage Unlikely Possible Likely
Examples...
Ethnicity; religion
Education; occupation; housing tenure; income
Relationship stability; parenting practices
• We believe that controlling for groups 1 and 2 is the right balance to strike to identify the causal effect of marriage. But debatable . .
.
© Institute for Fiscal Studies

• Cohabiting parents are more likely than married parents to:
– Be White or Black Caribbean
– Be of no religion
– Be low qualified
– Be home renters rather than homeowners
– Be teenagers at birth of first child
– Have lived together for short time
– Report that the pregnancy was unplanned
– Exhibit lower relationship quality (at 9 months)
Groups 1 and 2
• They are also more likely to:
– Have poorer maternal mental health (at 9 months)
– Have lower paternal involvement with baby (at 9 months) Group
3
– Be less likely to set regular bedtimes (at age 3)
© Institute for Fiscal Studies

Outcome
BAS (age 3)
A
-0.101
**
SDQ (age 3) -0.325
**
BAS (age 5) -0.192
**
SDQ (age 5) -0.301
**
B
-0.155
**
-0.316
**
-0.229
**
-0.291
**
C
0.008
-0.187
**
-0.056
-0.176
**
D
0.065
-0.129
**
-0.017
-0.125
**
E
0.041
-0.068
-0.049
-0.086
*
A controls for the child’s month and year of birth
B also controls for m other’s ethnicity, immigration status and religion
C also controls for education and socio-economic classification of the parents
D also controls for household income, tenure and work at 9 months
E also controls for family structure at 9 months
F also controls for relationship quality at 9 months
F
0.048
-0.039
-0.044
-0.054
© Institute for Fiscal Studies

• Small gap in cognitive ability at ages 3 and 5, largely explained by the fact that, compared to married parents, cohabiting parents:
– Have lower education
– Have lower occupational status
–
Have lower income
– Are more likely to live in social housing
• Larger gap in social and emotional development at ages 3 and
5, largely explained by the fact that cohabiting parents:
– Have lower education
– Have lower socio-economic status
– Are more likely to have unplanned pregnancies
– Report lower relationship quality when their child is 9 months old
© Institute for Fiscal Studies

• Differences in outcomes between children born to married and cohabiting couples largely reflect differential selection into marriage, rather than a causal effect of marriage itself
– Otherwise marriage needs to lead to very significant improvements in parents’ socio-economic status and relationship quality
• Suggests that providing a tax incentive to encourage more parents to get married is unlikely to significantly improve child outcomes
© Institute for Fiscal Studies

• Policies that improve educational attainment amongst poor children are likely to have long-term pay-offs in terms of increasing life chances amongst this generation and the next
• Amongst the family background characteristics I have considered:
– Increasing parental income or education may help achieve these aims
– Encouraging more parents to marry probably will not
• Of course, there are other ways to raise educational attainment amongst poor children as well
– e.g. raising school quality; improving attitudes and behaviours
• But causal evidence on the latter much less clear
– Clear need for well-designed policy experiments
© Institute for Fiscal Studies