Equal opportunity for all? Parental economic resources and children's educational achievement. (Working Paper No

We investigate the roles of parents ’ economic resources in children’s educational attainment and test the liquidity constraint hypothesis. Using data from the Panel Study of Income Dynamics, we find that parents ’ liquid assets have significantly positive associations with years of schooling, high school graduation, and college attendance. We find that the relationship between liquid assets and education is non-linear: children from negative liquid asset households have a higher chance of finishing high school but a lower chance of graduating college than those from zero liquid asset households. Results suggest that we should consider assets when seeking to understand educational mobility. Key words: liquidity constraint hypothesis; education; assets (wealth); economic resources; cohort Education is key to social and economic success and serves as a major mechanism for intergenerational transmission of socioeconomic status (Blau and Duncan 1967; Haveman and Wolfe 1995; Kane 2004; Mare 1992). Social scientists and policy makers have shown a continual interest in educational mobility, reflecting its importance in social stratification. Parents ’ economic resources, especially family income, have been a major focus of research on intergenerational educational mobility. Several empirical studies have identified family income as one of the strongest predictors of children’s educational outcomes (Haveman and Wolfe 1995; Kane 2004). Researchers, however, have not reached agreement on the mechanisms by which parents ’ economi