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Keynes Fund


Summary of Project Plan


Children of economically successful parents tend to be economically successful themselves. By some estimates, the intergenerational association of economic status in the UK is strongest in the developed world, implying low social mobility (Blanden, 2009; Corak 2013). Given that equality of opportunity is a common policy goal, disparities in economic outcomes determined by parental background are in urgent need of attention.

We propose an ambitious project studying the underlying causes of intergenerational associations in income, wealth, and education. We will make several advances over the existing literature. Our focus will be on understanding the causes and effects different types of transfers from parents to children. This is crucial for understanding how different government policies are likely to affect social mobility. For example, the impact of policies such as student bursaries will depend on whether such programmes discourage or reinforce parents’ investments in their own children.

We will employ a combination of approaches including estimation of dynamic structural life-cycle models of parental-child investments, that integrate dynamic factor models of skill accumulation. Specifically, we will provide estimates of the impact of time and money transfers on inequalities in lifetime wealth and income. We will combine rich longitudinal data with an estimated model of parental investments in their children over their lifetime. This model will enable us to: (i) Separate out the contribution of different forms of transfers (parental time investments, educational investments, and cash-transfers) in early adulthood in shaping child outcomes and intergenerational inequality; (ii) Quantify how parents trade-off these different investments; (iii) Understand how policies, such as university tuition levels, likely impact university attendance for different groups, and how these policies might impact the persistence of income across generations.

Our work will make significant contributions to the scientific literature on the intergenerational transmission of inequality. This research will have direct relevance to a number of current policy debates, including those around the taxation of property wealth and inheritances. For this reason, we believe it has the potential for significant impact among policymakers and the wider public.

This project is appropriate for funding by the Keynes Fund in that it will “extend the frontiers of traditional economics in order to raise Cambridge's profile in the critical area between economic theory… and public policy”, and will focus on questions relating to “reduced income/wealth disparities.”



Prof. Eric French


Professor Eric French is Montague Burton Professor of Industrial Relations and Labour Economics at the Faculty of Economics, University of Cambridge. His research areas are Public Choice and Political Economics. His primary research interests are Labor, Public Finance, Health, and Applied Econometrics.


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