Published by

by the Department for Education and Skills. The views expressed in this work are those of the author and do not reflect the views of the DfES. All errors and omissions remain the authors. Executive Summary It is clear from existing research that children from poorer backgrounds have worse educational attainments than their better-off peers. What is less clear, however, is the extent to which these differences are caused by income itself rather than parental ability, education, and other aspects of the child’s experience which differ between families but are not a direct result of income. If it is money in itself which makes a difference then increased income inequality among families with children (such as has occurred in recent years in the UK) will lead to increased inequalities in educational attainment. This paper discusses the variety of approaches that researchers have used to solve this identification problem in the US. These methods are then applied to UK data in order to find out the extent to which income makes a difference to the probability of staying on and to final qualification attainment