Education and Ethnicity in Canada.

An Intergenerational Perspective

ABSTRACT

Ethnic and intergenerational aspects of human capital investment are explored. Levels of and (cross-sectional) returns to, education across ethnic groups in Canada are estimated and large differences observed. For men, a positive correlation exists between ethnic group average years of education and its return. We also find large negative correlations between ethnic group average educational outcomes and the previous generation's fertility, suggesting a role for home production as a complement to formal education and supporting models of child quantity-quality trade-offs. Very slow intergenerational convergence in ethnic group level educational and labor market outcomes is also observed.

I. Introduction

It has become increasingly obvious that understanding the economic integration of the many ethnic communities making up society requires an understanding of the human capital investment process. Similarly, understanding human capital investment requires insight into the role of the "communities" in which people live. Previous studies have defined these communities along several, not always mutually exclusive, dimensions such as religion (Tomes 1983, 1984, 1985), geography (Borjas 1995), language (Bloom and Grenier 1992), and ethnicity or race (Borjas 1992; Chiswick 1988; Farley 1990; Gang and Zimmerman 1996). [1] In particular, the communities in which children grow up impact both the nature and quantity of their human capital investments, and intergenerational transfers occur at the level of these communities as well as the nuclear family. Using American data, Borjas (1992, 1994, 1995) looks at the intergenerational transmission of human capital and earnings among ethnic groups, and Chiswick (1988), in work closely related to that discussed in this paper, studies the intergenerational effect of ethnic background on educational outcomes.

This study explores the dispersion in educational outcomes across, and the intergenerational transmission of human capital within, ethnic groups in Canada. Looking across ethnic groups within one generation, we focus not only on the level of formal education obtained but also on differences in the rate of return to education, and we find substantial and systematic heterogeneity in both. Five and a half years of schooling separate the averages of the most extreme groups, and three full years of education separate the averages of the second highest and second lowest groups. The differences in the point estimates of the returns to education across ethnic groups are similarly large. In earnings regressions, for example, the second highest return is well over twice as large as the second lowest for both men and women. Further, for males the ethnic group-specific rates of return and average levels of education are strongly positively correlated for the current generation.

Consistent with intergenerational child investment models, we find that, for both males and females, the ethnic group-specific fertility of one generation is inversely related to the rate of return to education of, and average quantity of education obtained by, the subsequent generation. Other intergenerational correlations indicate that higher levels of education and income for an ethnic group in the parents' generation is correlated with higher levels of, and higher returns to, education for that group in the next, and the magnitude, especially for men, suggests that convergence among ethnic groups is quite slow.