What impact do the careers of fathers have on the choices of children? This is a summary of research on this subject by Arnaud Chevalier, to be presented at the Royal Economic Society's Annual Conference this week. The full paper is available on the conference website.
- About 10% of UK graduates are in the same occupation as their father 6 or 11 years after graduation.
- The intergenerational link is even stronger for farmers - 35% - and health professionals - 20%.
- More generally, a graduate whose father was a professional or an entrepreneur is between 20% and 30% more likely to be in the exact same occupation as his or her father. This strong relationship holds for both sons and daughters.
- Men whose fathers were in the same occupation earn between 5% and 8% more than other individuals in the same occupation. The gains from this pay premium are the highest for legal professionals and financial professionals, but not for farmers or health professionals. And there is no pay premium for women.
- As the pay premium for men increases with labour market experience, it seems to stem from intergenerational transmission of human capital rather than pure nepotism.
Chevalier notes that, to date, research has focused on documenting intergenerational mobility in earnings - the relationship between one generation's earnings and the earnings of their offspring. This relationship is usually found to be quite strong in the UK. Educational choice has been thought has being the main driving force behind the intergenerational mobility in earnings. But as Chevalier argues, the choice of occupation made by the two generations may also have a significant influence.
Frequently, it is observed that children are in the same occupation as one of their parents. These dynasties are observed across time and countries and are more common in some occupations, such as politician, entertainer,
doctor, entrepreneur or farmer.
Three hypotheses can explain the choice of occupation made by the offspring:
- Nepotism, where the parents use their position in order to obtain advantages for their children.
- Reduced set-up costs when creating a new business.
- Parents may transmit their ability to their children either genetically or by transmission of human capital.
Chevalier uses data from a 1996 survey of individuals who graduated from higher education institution in the UK in 1985 or 1990. These individuals have been out of university for up to 11 years and can therefore be considered to be in their 'career' occupation. Information is also available
on the occupation of the father when the respondents were 14.
The research first compares these two variables and finds that 10% of graduates are in the same occupation as their father. The intergenerational link is stronger for farmers (35%) and health professionals (20%). More generally, a graduate whose father was a professional or an entrepreneur is between 20% and 30% more likely to be in the exact same occupation as his or her father. This strong relationship holds for sons and daughters.
In a second step, the question of interest is whether children who go into the same occupation as their fathers obtain some financial gains. For women, there are no differences between individuals in the same occupation one of whom followed in her father's footstep and one who did not. In contrast, men whose fathers were in the same occupation earn between 5% and 8% more than other individuals in the same occupation. The gains are the highest for legal professionals and financial professionals, but not for farmers or health professionals.
Finally, the research provides some tentative evidence that these gains stem from similarities in the human capital of the fathers and sons, explaining the similarities of their decisions rather than in nepotism.