Wealth stratification in the early school career in Germany

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Highlights

  • Children of wealthy parents show higher math competences in the first grade.

  • Competence differences by parental wealth remain stable throughout primary school.

  • Children of wealthy parents are more likely to attend the highest school track.

  • Wealth differences add to other social disparities by SES.

Abstract

Recent research has established parental wealth as an important determinant of children’s educational achievement. However, parental wealth is often ignored in research on social inequality in education, or its influence is only considered at later stages of children’s educational careers. Our paper contributes to this research by examining the relationship between parental wealth and (1) children’s math competences at the beginning of primary school; (2) the development of children’s competences throughout primary school; and (3) children’s transition from primary to secondary school. We are looking at Germany, where the early ability tracking may make an early investment in education particularly important. Analyzing data from the German National Educational Panel Study, we find that parental wealth has a distinct association with children’s educational outcomes that adds to social disparities by other measures of parents’ socioeconomic status (SES). Our results indicate that children in wealthy households have higher competences already in the first grade. This advantage remains stable throughout primary school and translates into a higher probability to attend the highest secondary school track. Moreover, children in these wealthy households are more likely to attend the highest secondary school track, net of differences in competences and performance. Our results imply that ignoring wealth as a component of parental SES leads to an underestimation of the level of social inequality in education in Germany.

Introduction

Children’s parental social background crucially shapes their educational achievement, thus reproducing social inequality between generations (Blau & Duncan, 1967). Studies have found that children of parents with high socioeconomic status (SES) have on average higher competences and show better performance in school than children with low SES (Bradley & Corwyn, 2002). As a consequence of their better performance, they are more likely to make more ambitious educational decisions (i.e., primary effect of social origin) and they are more likely to receive higher educational degrees. Yet, children of parents with high SES make more ambitious educational decisions even when they have the same competences and school performance as children of parents with low SES (i.e., secondary effect of social origin) (Boudon, 1974; Jackson, 2013).

To approximate parental SES, researchers usually use measures of parental education, income or occupational class. However, recent research on the United States, Sweden and Norway suggests that parental wealth should be added to the existing measures comprising parental SES, to better capture social inequalities in education (Elliott & Sherraden, 2013; Hällsten & Pfeffer, 2017; Pfeffer, 2018; Wiborg, 2017). Ignoring wealth as a specific dimension of SES may result in an underestimation of social stratification in education.

Wealth possesses specific features that are not captured by traditional measures of SES, but that contribute to social stratification in unique ways. Wealth can stem either from self-accumulation over one’s own life-course or from transfers (e.g., inter-vivo transfers or bequests). Unlike earned income, education or occupational status, the accumulation of which generally requires time, effort, and ability, transferred wealth offers access to capital and goods independently of the individual’s decisions or their abilities. Because wealth is less volatile than income, it is a more accurate indicator of an individual’s or household’s long-term consumption potential and capacity to maintain a particular standard of living (Spilerman, 2000). Yet, wealth does not have to be consumed in order to affect behavior. The mere expectation of incoming wealth and the potential use of wealth can impact individual behavior (Brown, Coile, & Weisbenner, 2010).

The association between children’s competences and their educational performance with parental wealth follows the same pattern as what previous research has found for other measures of parental SES. Children of wealthy parents have higher competences and show better performance in school as compared to children of less wealthy parents. In the United States, children in wealthy households were found to have higher test scores in math than children of less wealthy households (Friedline, Masa, & Chowa, 2015; Orr, 2003; Williams Shanks, 2007; Yeung & Conley, 2008). The findings for the association between parental wealth and reading test scores are, however, inconsistent (Elliott, Destin, & Friedline, 2011). For Sweden, Hällsten and Pfeffer (2017) found a substantial positive association between parental wealth and children’s grade point average (GPA) in the ninth grade. Wiborg (2017) observed the same for Norway. Cesarini, Lindqvist, Östling, and Wallace (2016)), however, found no association between lottery wins and children’s competences or GPA in Sweden. This last finding suggests that wealth may have different impacts on children’s educational outcomes, depending on whether children grow up with the knowledge of the existence of parental wealth or not (Hällsten & Pfeffer, 2017, p. 331).

Additionally, parental wealth has been found to be associated with more ambitious educational decisions and higher educational attainment. Research on the United States showed that children of wealthy parents were more likely to attend college as compared to children with less wealthy parents (Conley, 2001; Jez, 2014; Pfeffer, 2018; Zhan, 2006). In Sweden, children of wealthy parents were also more likely to attend and graduate from academic secondary school tracks and to choose tertiary fields of study, which are associated with higher earnings (Hällsten & Pfeffer, 2017; Hällsten & Thaning, 2018). In the only study on Germany, Pfeffer (2011) analyzed the effect of parental wealth on children’s educational attainment measured as the number of years of schooling attained. He found a positive and statistically significant association between parental wealth and children’s educational attainment. While parental education shows the highest partial correlation with children’s educational attainment, the correlation with parental wealth was of similar magnitude as the correlations with income and occupational class.

The relationship between parental wealth and children’s educational outcomes can be expected to become even more relevant in the future, given that wealth inequality has grown during the last decades in most Western countries (Piketty & Zucman, 2014). Yet, important research gaps remain. First, there is a lack of research in countries other than the United States, Norway, and Sweden. The results for these countries are probably not generalizable to most other countries because of different educational and welfare state systems.

Second, there are few studies on the relationship between parental wealth and children’s early educational outcomes. But past research has shown that social stratification of competences emerges already for young children (Feinstein, 2003; Linberg, Schneider, Waldfogel, & Wang, 2019) and that early investments in competences are more effective than later ones (Cunha & Heckman, 2008). With regards to parental wealth, research has not yet shown when social disparities emerge, nor how these develop throughout the early years of schooling.

Third, most existing studies on wealth stratification in education looked either at performance in school or test scores or at educational decisions. Therefore, they cannot differentiate between primary and secondary effects of parental wealth or they only hinted at this differentiation (Hällsten & Pfeffer, 2017; Huang, Guo, Kim, & Sherraden, 2010). Policy implications, however, would differ depending on whether primary or secondary effects are more relevant for children’s educational outcomes.

In this paper, we aim to make two contributions to reduce these research gaps: First, we assess the association between parental wealth and early educational outcomes in an institutional context with an early and important educational decision, namely the transition to different secondary school tracks after elementary school in Germany. This early tracking may make an early investment in education particularly important. Within this context, we examine the relationship between parental wealth and (1) children’s competences1 at the beginning of primary school; (2) the development of competences throughout primary school; and (3) children’s transition to secondary school.

Second, we integrate wealth stratification in the transition to secondary school tracks in the framework of primary and secondary effects, both theoretically and empirically.

Section snippets

Educational system

Similar to Scandinavian countries and in contrast to the United States, most children in Germany attend the public education system, which is free from tuition fees. Financial resources of schools are more equally distributed in Germany as compared to the United States as schools are funded centrally by the federal states and not by taxes levied in the municipality. German citizens enjoy a more generous social security system than their American counterparts. Just like in the Scandinavian

Competence

Based on existing research, four interrelated mechanisms may explain the relationship between parental wealth and children’s competences. The unit of analysis in this literature is usually the family.

  • 1)

    Wealth increases resources for families’ investment in children. Parents can invest their wealth in the purchase of resources, that foster the competences of their children (Becker & Tomes, 1986). These resources include learning materials (e.g., books or educational software) as well as

Data

We use data from the German National Educational Panel Study (NEPS) (Blossfeld, Roßbach, & von Maurice, 2011) for our empirical analysis.3

Descriptive statistics

Table 1 shows the distribution of all the variables used in our analyses. The first three columns show the summary statistics of the variables used in the analysis of test scores (sample A), separately for each year in which a test in math took place. In sample A, parental net worth ranges from -3.75 m EUR to 195 m EUR, with the second-highest value being 16 m EUR. The mean of net worth in sample A is 195k EUR and the median is 100k EUR. About 9 % of the households in sample A have a negative

Discussion

In this paper, we investigated the association between parental wealth and (1) children’s competence, operationalized as test score results in math at the beginning of primary school; (2) the development of children’s math competence throughout primary school; and (3) children’s educational transition to secondary school, operationalized as attendance to the highest secondary school track.

In line with prior research, we find that even after controlling for traditional measures of SES, parental

Funding

This work was supported by the “German Research Foundation” (DFG), project entitled “The Effect of Parental Wealth on Educational Decisions” under Grant No. 403547843.

Acknowledgements

We are grateful for comments made by the participants of the 3rd International NEPS Conference on November 22–23, 2018 in Bamberg, Germany; the ESCR Workshop “Wealth Inequality and Mobility” on December 6–7, 2018 in Esch-sur-Alzette, Luxembourg; and the RC28 Spring Meeting on March 21–23, 2019 in Frankfurt am Main, Germany. Moreover; we are grateful for the comments and manuscript editing support by Klaus Pforr, Till Stefes, Dorian Le Jeune, Nourhan Elsayed, and Alejandra Rodríguez Sánchez.

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