The Relative Effect of Family Characteristics and Financial Situation on Educational Achievement

Children from poorer backgrounds are generally observed to have lower educational outcomes than other youth. However, the mechanism through which household income affects the child's outcomes remains unclear. Either, poorer families are financially constrained or some characteristics of the family make the children less likely to participate in post-compulsory education. We propose a methodology that separates financial and familial effects. As in previous studies, we find that pupils from poorer families are less likely to invest in education. However, a financial transfer would not lead to a significant increase in schooling investment, which supports the view that the family characteristic effects dominate the financial constraint effects.