The strong correlation between parents’ economic status and that of their children has
been well-documented, but little is known about the extent to which this is a causal phenomenon.
This paper attempts to improve our understanding of the causal processes that contribute to
intergenerational immobility by exploiting historical changes in compulsory schooling laws that
affected the educational attainment of parents without affecting their innate abilities or
endowments. We examine the influence of parental compulsory schooling on grade retention
status for children aged 7 to 15 using the 1960, 1970 and 1980 U.S. Censuses. Our estimates
indicate that a one-year increase in the education of either parent reduces the probability that a
child repeats a grade by between five and seven percentage points. Among 15 to 16 year olds
living at home, we also estimate that parental compulsory schooling significantly lowers the
likelihood of dropping out. These findings suggest that education policies may be able to reduce
part of the intergenerational transmission of inequality.