Do Borrowing Constraints Matter for Intergenerational Educational Mobility? Evidence from Japan
Student loans or scholarships for students facing financial difficulties are likely to have a positive effect on the educational achievement transmitted from one generation to the next.
We examine the intergenerational transmission of educational attainment using data on Japan. By exploiting unique information on whether children have ever given up schooling for financial reasons and, if they have, which level of schooling they have forgone, we attempt to assess the role of borrowing constraints in determining intergenerational educational mobility in a more direct manner than previous attempts made in the literature. We find a steady increase in the extent of the intergenerational transmission of educational attainment, resulting in lower intergenerational mobility, during the postwar period in Japan. We also find that while the importance of borrowing constraints for determining intergenerational educational mobility declined at one time, it seems to have become significant enough once again to lower intergenerational educational mobility for the youngest cohort we examined. However, our analysis also shows that the relative importance of adolescent academic ability for children’s educational attainment has increased in recent years, thereby underlining the increasing importance of early investments in children’s human capital for their subsequent academic advancement.