Parental Education and Children’s Income in China: Causal Evidence on Transmission Channels and the Differentiated Roles of Fathers and Mothers

This study investigates the mechanisms through which parental education shapes children’s income in China, highlighting both direct and indirect effects. Using nationally representative data from the 2020 China Family Panel Studies (CFPS), we extend the standard mediation framework by integrating sample selection correction and endogeneity control through the Heckman two-step procedure and heteroskedasticity-based IV estimator. This approach allows us to isolate causal pathways while addressing labor market selection and the endogeneity of children’s schooling and educational mismatch. We examine four transmission channels—children’s years of education, cognitive ability, work experience, and educational mismatch—while differentiating the roles of fathers and mothers. The results show that both parents’ education significantly improves children’s earnings, but through distinct mechanisms: fathers’ education exerts a stronger direct effect, particularly on labor market outcomes, whereas mothers’ education operates more strongly through schooling and cognitive development. Among the mediators, children’s own education and cognitive ability emerge as the most influential, while educational mismatch has only a limited effect. These findings provide new evidence on the multidimensional nature of intergenerational income transmission, demonstrating how parental education operates through heterogeneous pathways. The study contributes to the literature on social mobility by advancing causal mediation analysis in the Chinese context and offers policy insights into promoting both parental and child education as levers for reducing long-term income inequality.