Is education the mechanism through which family background affects economic outcomes? A generalised approach to mediation analysis. (August 2017)

• Record Type: Journal Article
• Authors: Mendolia, Silvia; Siminski, Peter
• Is Part Of: Economics of education review. Volume 59(2017:Aug.)
• Page Start: 1
• Page End: 12
• Publication Date: 2017-08
• Subjects: Mediation analysis -- Intergenerational mobility -- Equality of opportunity; I24 -- C49 -- J62; Education -- Economic aspects -- Periodicals; 370
• DOI: 10.1016/j.econedurev.2017.05.001
• Languages: English
• ISSNs: 0272-7757

Abstract

Highlights: We take a 'big picture' view on the role of education in intergenerational mobility. Mediation analysis is a technique for studying mechanisms in causal relationships. We generalise mediation analysis to allow for multidimensional treatments. We treat family background as exogenous and multidimensional. Education explains 21%−37% of the family background effect on earnings in Australia. Abstract: We seek to quantify the role of education as a mechanism through which family background affects economic outcomes. To this end, we generalise mediation analysis to allow for multidimensional treatments. This improves the validity of mediation analysis for our application, in which family background is exogenous and multidimensional. Our approach allows the mediating role of education to vary across background characteristics, whilst also estimating its overall mediating effect. We estimate that educational attainment explains 21%–37% of the family background effect on hourly earnings in Australia, and only 13%–19% of the effect on wealth. We argue that these estimates are likely upward-biased. Therefore the link between family background and economic outcomes operates mostly through other mechanisms.