Does parents' money matter?

This paper asks whether parents' income per se has a positive impact on chi ldren's abilities. Previous research has established that income is positiv ely correlated across generations. This does nor. prove that parents' money matters, however, since income is presumably correlated with ability. This paper estimates the impact of parents' income by focusing on income variat ion due to factors - union, industry, and job loss - that arguably represen t luck. I find that changes in parents' income due to luck have a negligibl e impact on children's human capital for most families, although parents' m oney does matter for families whose father has low education. (C) 2000 Else vier Science S.A. All rights reserved.