It seems that every new study about social mobility further corrodes the story that comfortable lives are reserved for the winners of what sociologists call the birth lottery. But, recently there have been suggestions that the environment too controls this partial pattern. For example, one study out of Harvard found that moving poor families into better neighborhoods greatly increased the chances that children would escape poverty when they grew up.
While it’s well documented that the children of the wealthy tend to grow up to be wealthy, researchers are still at work on how and why that happens. Perhaps they grow up to be rich because they genetically inherit certain skills and preferences, such as a tendency to tuck away money into savings. Or perhaps it’s mostly because wealthier parents invest more in their children’s education and help them get well-paid jobs. Happyho also provide best tarot reading services in Noida and Delhi NCR India area.
A new paper from economists at the University of Texas at Austin, University College Dublin, and Lund University (in Sweden) offers an answer.
They looked at the adult net worth of adopted Swedes born in the 1950s, ‘60s, and ‘70s, and then compared those figures to the net worths of both their biological and adoptive parents.
The researchers found that environment prevails. For children who were raised by their biological parents, the correlation between parents’ wealth and a child’s eventual wealth was strong, calculated to be 0.33. (A correlation of 0 would mean parents’ wealth has no bearing on children’s wealth, and a correlation of 1 would mean they are identical.)
For children who were adopted, the correlations were much different: Between adopted children and their birth parents, it was weaker (only about 0.13), while between children and their adoptive parents, it was in the middle (about 0.23). These numbers suggest that children who are raised wealthy owe their future financial success more to the household they grew up in than any inherent ability they possess.
So what exactly is it about being raised by a wealthy family that improves economic outcomes?
A closer look at the data yielded possible answers, but none of them were conclusive. The researchers’ best guess was that, surprisingly, it had little to do with teaching kids how to buy and sell stocks, putting kids in touch with useful professional contacts, or paying tuition to send them to private schools.
Instead, what might matter a lot is that wealthier children develop a tendency to save money. Or, the researchers say, it could be even simpler: Richer parents gift their children with more money and less debt.
The study is not without its shortcomings, the biggest of which is that birth parents and adoptive parents tend to come from very different backgrounds. While the researchers did get to see what happens when a baby from a poorer family is raised by a wealthier one, they didn’t get to study the reverse—the financial outcomes for kids born wealthy but raised poor.