Occupational dynasties

Children often follow their parents in the same occupation. The literature has previously documented occupational persistence, but whether it has economic implications remains an open question. Using administrative data from the Netherlands and a unique policy experiment, this paper documents the prevalence of occupational transmission and estimates its effects and selection for medical doctors. I find that children are twice as likely to enter a parent’s field, with this rate substantially increasing for those above the top quartile of the parental income distribution. In addition, OLS estimated returns to occupational persistence are 2.5%. I focus on the medical profession to decompose these “naive” returns into a treatment and a selection effect of occupational transmission. I find that ’dynastic’ doctors experience a 24% income boost relative to their ’non-dynastic’ counterparts, corresponding to 58% higher returns from the medical profession. Furthermore, I identify a substantial negative selection bias in the OLS estimates, explaining why naive returns considerably underestimate the effects of occupational persistence. The large treatment effect together with the unequal incidence along the income distribution highlights the critical role of occupational transmission in exacerbating inequalities.

That is from Maria Ventura, a job market candidate from LSE.