Working paper series // Federal Reserve Bank of Boston 11-6
This paper examines whether rising house prices immediately prior to children entering their college years impacts their intergenerational earnings mobility and/or educational outcomes. Higher house prices provide homeowners, especially liquidity constrained ones, with additional funding to invest in their children's human capital. The results show that a 1 percentage point increase in house prices, when children are 17-years-old, results in roughly 0.8 percent higher annual income for the children of homeowners, and 1.2 percent lower annual income for the children of renters. Additional analysis shows that the children who benefit the most from rising house prices are those whose parents are liquidity constrained homeowners. Rising house prices also make homeowners' children more likely to graduate from college and have less noncollateralized debt when young adults. Both of these results are consistent with rising house prices enabling parents to invest more in their children.
intergenerational mobility house prices educational attainment