Using data from the Panel Study of Income Dynamics, this paper tests the liquidity constraint hypothesis and investigates the roles parents’ economic resources play in children’s educational attainment. The Center for Social Development finds that parents’ liquid assets have significantly positive associations with years of schooling, high school graduation, and college attendance. The relationship between liquid assets and education, however, is non-linear: children from negative liquid asset households have a higher chance of finishing high school but a lower chance of graduating college than those from zero liquid asset households. Results suggest that assets play an important role in educational mobility.
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