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SUMMARY

This paper presents a model that provides conditions under which a causal interpretation can be given to the association between childhood parental employment and subsequent educational attainments of children. The key parameter comes from theconditional demand function for children's future earning capacity. Its identification rests on having data on siblings and assumptions about the timing of parents' knowledge of their children's endowments. In addition to sibling differences, the useof a fixed-effects instrumental-variables estimator identifies the parameter under weaker conditions. Empirical analysis informed by the model reveals a negative and significant effect on the child's educational attainment of the months of the mother's full-time employment when the child was aged 0–5. The effect of the mother's part-time employment is smaller and less well determined, but again negative. These results suggest that the substitution effect of the mother's employment dominates the income effects. Stronger adverse effects are found for children of less-educated mothers. Copyright © 2012 John Wiley & Sons, Ltd.