TY  - GEN
AB  - We develop a theoretical labour market model with two generations of workers, endogenous
social networks of parents and binary schooling choices of children. Since the market
skill premium is unobservable, families rely on noisy wage information obtained from their
social contacts giving rise to heterogeneous expectations across families. If social networks
are subject to skill homophily and high skill parents are a minority, then children in low skill
families are stronger affected by the lack of objective information, their expectations are more
dispersed and they are less likely to study giving rise to a positive intergenerational schooling
correlation. Next, we calibrate the model to the German labour market data (SOEP) and
show that the described mechanism can potentially account for up to 15% of the intergenerational
schooling correlation. Moreover, the data strongly supports the idea of skill homophily
in the social networks. Finally, we extend the model to analyze the interaction between the
network effect and the classical ability transmission for intergenerational mobility. We find
that the interaction term is always negative, crowding out the network effect, which may
help to explain small network and neighborhood effects reported in recent empirical work.
Nevertheless, accounting for the network effect improves the fit of the model and helps to
explain an inverse U-shape relationship between the intergeneratioanl schooling correlation
and the share of high skill parents observed in the data.
DA  - 2021
DO  - 10.4119/unibi/2959720
KW  - intergenerational mobility
KW  - social networks
KW  - heterogeneous expectations
LA  - eng
PY  - 2021
SN  - 2196−2723
SP  - 43-
TI  - Parental Networks, Wage Expectations, and the Intergenerational Educational Mobility
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29597205
Y2  - 2024-11-22T02:33:31
ER  -