The project has three main goals: (1) A robust estimation of the effect of parental wealth on the child’s educational decision. (2) Clearing up the causal mechanisms linking parental wealth to educational decisions. (3) Studying the parental wealth-educational decisions relationship along the distribution of wealth.

Research in the United States and other European countries find a unique effect of wealth on educational achievement and attainment even when controlling for other measures of socio-economic status like income, education, and social class. Most studies find that wealth increases achievement and helps to get higher degrees. Thus, wealth does not only reproduce social inequality through inheritances but also indirectly through education. Yet, empirical evidence is missing for Germany. Results for other countries are probably not generalisable because of differences in the educational system as well as in the distribution of wealth.

We assume that parental wealth has a unique effect on educational outcomes and study the relationship between parental wealth and children’s educational decisions from a life course perspective starting at the end of primary education and finishing at the transitions after successful completion of secondary education. For our statistical analyses, we will make use of the data of the National Educational Panel Study (NEPS). As the NEPS collects data for different educational decisions with comparable indicators of parental background – in our case most importantly wealth, cognitive abilities of the children, school grades, extra-curricular activities, and parenting behaviour it is the ideal database for our proposed research project. To assess different cognitive developments and motivational changes we apply fixed effects and growth curve models. Decisions at fixed time points will be analysed with logistic regression. Decisions and pattern with a time component will be analysed with event history analysis or respectively sequence analysis. We split the project into three working packages, each capturing a different transition.

Work package 1: Transitions after successful completion of secondary education

In the first work package, we will focus on the impact of parental wealth on children’s educational decisions after successful completion of secondary education. This work package will be a replication and extension of our preliminary work that we conducted using the SOEP data. In our preliminary work, we understood children to decide between three different options after successful completion of upper secondary education: first, to continue to higher education (universities and universities of applied sciences); second, to transition to the labor market – either directly by entering into paid labor, or indirectly by entering into vocational training before – and third, neither to continue in higher education nor to enter into the labor market. We proposed two opposing effects of parental wealth on children’s educational decisions: disadvantage compensation and educational demotivation.

Work package 2: Transition from primary to secondary education

In the second work package we plan to study the effects of parental wealth on the choice of secondary school. As this transition happens early in children’s lives in Germany (for most children at the age of 10 years), we assume that the actual decision is made by the parents and not by the children themselves. Our underlying assumption is that parents will opt for the educational alternative which allows them to maximize their child’s socio-economic status. We assume that parental wealth has an independent effect on their decision, after controlling for the traditional measures of their socio-economic status, i.e. education, income and occupation. This effect is rooted in the purchasing and inheritance function of wealth and wealth is expected to work in a similar way here as income: (monetary) assets can be used to purchase education (e.g., through buying private lessons or financing extra years in the educational system). Due to its purchasing function, parental wealth increases the child’s probability to successfully finish the chosen educational track. More precisely, we expect wealth to be able to compensate disadvantages of low intellectual abilities. While wealthy parents can use their wealth to compensate for their child’s low abilities (disadvantage compensation), non-wealthy parents cannot. Wealthy parents should react to bad grades with extra lessons to improve the likelihood of their child to continue in upper secondary education (which offers direct access to higher education if finished successfully) in order to maximize their long-term socio-economic status. The NEPS data contain indicators for both the children’s competencies and the actual school performance (grades). Summing up, we expect wealthy parents to be more likely to send their children to upper secondary schools as compared to non-wealthy parents even if they have low abilities, measured by grades (disadvantage compensation effect).

Work package 3: Transitions within secondary education

In the third work package, we will analyze the effect of parental wealth on the educational trajectories within secondary education. As discussed in work package 2, students enter secondary education at different tracks. Successfully finishing Gymnasium directly grants a higher education entrance certificate. Whereas the lower tracks Realschule and Hauptschule traditionally did not allow entering higher education in the past, by now several paths exist and are utilized after finishing lower secondary tracks that grant access to higher education. More specifically, we will examine the effect of parental wealth on the following transitions within secondary education: The probability to drop out of the secondary track that students started at; the probability to continue with higher tracks in the secondary school level after finishing the lower level; the probability to earn an educational degree that allows access to higher education. For the analyses we have to take into account the different alternatives in each federal state. Moreover, for reasons of simplification we ignore all forms of special schools dedicated to students with disabilities (“Sonderschule”, “Förderschule”).