www.elsevier.nl / locate /econbase Does parents ’ money matter?

This paper asks whether parents ’ income per se has a positive impact on children’s abilities. Previous research has established that income is positively correlated across generations. This does not prove that parents ’ money matters, however, since income is presumably correlated with ability. This paper estimates the impact of parents ’ income by focusing on income variation due to factors – union, industry, and job loss – that arguably represent luck. I find that changes in parents ’ income due to luck have a negligible impact on children’s human capital for most families, although parents ’ money does matter fo