June 2016. Children who grow up around books do better in later life. That is the central finding of research by Giorgio Brunello, Guglielmo Weber and Christoph Weiss, which is forthcoming in the Economic Journal. Analysing data on nearly 6,000 men from across Europe born between 1920 and 1956, their study finds that:
• One additional year of education increases average lifetime earnings by 9%.
• But the returns to education vary markedly with the men’s socio-economic background: they are significantly lower for the sizeable fraction (40%) of the men who had less than a shelf of non-school books at home at age 10.
• The returns to education for men brought up in households with less than a shelf of books were much lower (5%) than for the luckier ones who had access to more (21%).
• More than two in every five of the men grew up in relatively isolated rural areas. Of these, those that had access to books were more likely to move to the better earning opportunities in cities than those without books (46% versus 33%) and to have had their first job be a white-collar job (33% versus 15%).
To calculate the effect of education on lifetime earnings, the researchers use a sequence of school reforms that raised the minimum school leaving age in Europe for people born between 1920 and 1956. They analyse data (from the Survey on Health, Ageing and Retirement in Europe, SHARE) on 5,820 men living in nine different continental European countries.
Given that 43% of this cohort grew up in rural areas, the study distinguishes between rural and urban boys. School reforms were particularly effective in increasing average educational attainment in rural areas, indicating that the direct and indirect costs of attending school were higher for children living on farms or remote agricultural villages.
Why did books at home matter so much for the returns to education? The researchers comment:
‘Perhaps books matter because they encourage children to read more and reading can have positive effects on school performance – and much more, as Roald Dahl powerfully reminds us, “Matilda’s strong young mind continued to grow, nurtured by the voices of all those authors who had sent their books out into the world like ships on the sea”.’
‘Although the data do not reveal whether books were read, and how many, it seems likely that there is a positive relationship between the number of books at home and a child’s reading activities.’
Alternatively, books at home matter for earnings because they capture the effects of early socio-economic conditions. Unsurprisingly, households where the main breadwinner was in a white collar occupation were more likely to have at least a shelf of books, both in rural and in urban areas.
At the same time, however, 45% of individuals who grew up in a rural household with a blue-collar parent (and 58% of those from urban areas with a blue-collar parent) had at least a shelf of books. This suggests that books indicate not only differences in parental occupation, but also the cultural background of the household and the development of cognitive skills.
But why did individuals from rural areas with many books at home need compulsory school reforms to collect the high returns associated with additional education? Why did they not invest in their education even in the absence of changes in the minimum school leaving age?
Perhaps because people living in rural areas were much more isolated than nowadays and chose education based on perceived rather than actual returns. Perceived returns may have been much lower than actual returns, especially if productivity growth in urban jobs was underestimated.
In fact, rural boys with books were more likely to move to the cities than those without books and to have had their first job be a white-collar job. While growing up in rural homes with books, they may have not realised how high the marginal return to education could be but they reaped the benefits of their education by moving into fast-growing urban areas.
Brunello, G., G. Weber and C. Weiss (2016): Books Are Forever: Early Life Conditions, Education and Lifetime Earnings in Europe. The Economic Journal. DOI: 10.1111/ecoj.12307
The authors are at the University of Padova.
For further information about the study, please contact Guglielmo Weber via email: firstname.lastname@example.org; Giorgio Brunello via email: email@example.com or Christoph Weiss via email: firstname.lastname@example.org.
In the analysed generation, unfortunately not enough comparable data from girls with a later labour market career was available. This is why the authors focused on boys in this study.
Picture: Simone Peter_pixelio.de