Random Wealth and Human Capital

Sunday, August 31st, 2014

Does the lack of wealth constrain parents’ investments in the human capital of their descendants? Nope:

We conduct a fifty-year followup of an episode in which such constraints would have been plausibly relaxed by a random allocation of wealth to families. We track descendants of those eligible to win in Georgia’s Cherokee Land Lottery of 1832, which had nearly universal participation among adult white males. Winners received close to the median level of wealth — a large financial windfall orthogonal to parents’ underlying characteristics that might have also affected their children’s human capital. Although winners had slightly more children than non-winners, they did not send them to school more. Sons of winners have no better adult outcomes (wealth, income, literacy) than the sons of non-winners, and winners’ grandchildren do not have higher literacy or school attendance than non-winners’ grandchildren. This suggests only a limited role for family financial resources in the formation of human capital in the next generations in this environment and a potentially more important role for other factors that persist through family lines.

One day, science may uncover some of these other factors that persist through family lines


  1. Kent says:

    Ha! Next you’ll be telling me one day man will walk on the moon!

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