The Individual’s Level of Education

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Theoretical Background

The Importance of Knowledge

As early as 1776, when Adam Smith’s book about the wealth of nations was first published, he recognized the significance of knowledge:
“A man educated at the expense of much labor and time to any of those employments which require extraordinary dexterity and skill, may be compared to one of those expensive machines” (Smith, 1976, p. 118).
He continues elaborating on the importance of a country’s stock, or capital, for the accumulation of wealth and economic growth. He divides stock into the portion which is consumed immediately, fixed capital, and circulating capital. Fixed capital includes, amongst other things, “the acquired and useful abilities of all the inhabitants or members of the society” (Smith, 1976, p. 282). Smith (1976) points out that acquiring an education is a costly investment that eventually repays with a profit.
Solow (1956) introduces a model explaining rates of economic growth with the level of investment, depreciation of capital stock and population growth. The residual in this model describes that part of productivity growth of nations over time that is not explained by the traditional input factors included in the model. It explains total factor productivity, which mostly implies technological progress (Johnson, 2010).
Mankiw, Romer, and Weil (1992) add the accumulation of human capital to the Solow growth model showing that it is a crucial variable for explaining cross-country differences in economic growth, where economic growth is positively related to the level of education. Glaeser, Scheinkman and Shleifer (1995) show a similar relationship in their cross-city study. The analysis of 203 cities in the United States shows significantly higher growth rates where schooling is high (Glaeser et al., 1995).
In his cross section of 98 countries over 25 years Barro (1991) showed that the higher the initial human capital the higher the growth rate of real GDP per capita. Since 1993 Barro and Lee have been using extensive datasets to show the significant positive impact of education on GDP. In their latest elaboration using a dataset from 1950 to 2010 including 149 countries they confirm this relationship (Barro & Lee, 2010).
Before the rise of market economies knowledge was traditionally passed on from parents to their children who eventually took over their parents’ occupation. However, as economic systems shifted from independent entities, which completely supported themselves autonomously, to market oriented systems, workers became more specialized. They no longer work for themselves but are employed by a limited number of entrepreneurs (Bowles et al., 2005). This leads to high incentives to increase one’s value on the job market, e.g. with education and on-the-job training, to be able to find employment and to receive a high salary (Mankiw, 2004).
The emergence of capitalism – an economic system where owners of capital aim at making a profit – intensifies competition even further. Companies need to produce a surplus and invest it into finding ways of making better products at lower costs, ways of increasing productivity (Bowles et al., 2005). The key to achieving this goal is innovation, already recognized by the Austrian economist, Joseph Schumpeter, as the foundation to generate profit (Schumpeter, 1926). Innovations are changes in technology, processes, or strategies. They do not only require highly educated and specialized workers but also lead to more tasks evolving (Bowles et al., 2005).
This shows that the importance of knowledge is at a peak, which has been studied by numerous scholars (von Hippel, 1988; Lundvall, 2004; Esterhuizen, Schutte, & du Toit, 2011). Education is yielded at by employment seeking workers to improve their position on the labor market. Employers require educated workers to improve their position on the production market. Education is strongly correlated with living standards, GDP and progress (Solow, 1956, Barro, 1991, Mankiw et al., 1992, Glaeser et al., 1995, Bowles et al., 2005, Barro & Lee, 2010). The rise in importance of knowledge likewise increases the importance and amount of universities, which are the “most important supplier of knowledge” (Geuna, 1999, p. 4).
The growth in importance and number of universities is accompanied by an increase of competition between them. This is even further intensified by globalization, which, above all, is caused by technological advancements leading to, for example, increased mobility and a fast and easy information flow with the help of the internet. Universities now compete for students that meet their admission standards all over the world aiming at maximizing their prestige with their academic output (De Fraja & Iossa, 2002; Bowles et al., 2005; Marginson, 2006).
Together with the increase in competition, universities are transforming into business-like institutions. This means they increasingly make use of marketing theories and management concepts that have been proven successful in the business world (Hemsley-Brown & Oplatka, 2006). Instead of being untouchable institutions that impart knowledge to the privileged members of society, universities are becoming a part of the economy (Evans, 2004; Onsmann, 2008).
Running a university successfully requires business considerations when it comes to administration, finance and recruitment. Attracting and keeping the most talented students can be attained with the help of marketing practices, that aim at the students themselves as well as their parents as their post important references (Molesworth, Nixon, & Scullion, 2009; Potts, 2005; Eagle & Brennan, 2007).

Parental Influence

Knowledge used to be passed on from parents to their children who eventually took over their parents’ occupation (Bowles et al., 2005). In today’s market economies it is passed on by education institutions. Nevertheless, parents play a crucial role in their children’s educational path. This influence is not only important during the actual decision making process. Parental support and the socioeconomic background are crucial factors that influence performance in primary and secondary school.

Decision Making

When analyzing the influence parents have on their children’s attainment of a university degree, it stands to reason to take a look at choice behavior and considerations immediately before the decision. The consequences of a wrong decision are heavy, studies repeatedly show that making wrong decisions in education and career is one of the most regretted decisions in people’s lives (Morrison, Epstude, & Roese, 2012; Beike, Markman, & Karadogan, 2009). This leads to the assumption that parents have a high motivation to lead their children on the right educational path and to protect them from making a decision they will regret.
It has been acknowledged that the decision process for higher education (HE) is different from common processes because it is made within a social context and over a very long period of time, and is thus highly subject to being influenced and changed (Sauermann, 2005). Since choosing a university is a high-involvement decision future students usually engage in extensive information search (Dawes & Brown, 2005) and take time and effort to evaluate their alternatives (Solomon, Bamossy, Askegaard, & Hogg, 2010), which are a selection of universities where they meet the admission standards (De Fraja & Iossa, 2002).
There is a large amount of studies about the evaluative criteria individuals determine for picking a certain career (Sauermann, 2005; Hellberg, 2009), a higher education institution (James et al., 1999; Dawes & Brown, 2005; Maringe, 2006; Hachmeister et al., 2007, Johnston, 2010), a program or major (Hachmeister et al., 2007; Lörz et al., 2011). The three most important factors for Swedish high school students when considering a university in 2010 were a good education, proximity to hometown, and a good reputation. Also considered important were a pleasant town and student life, the quality and range of educational programs, and the possibility of exchange studies (SCB, 2010). International studies identified many criteria for the study choice. These include career and monetary considerations, a person’s interests and abilities, available information and advice from peer groups, characteristics and qualities of universities, as well as personal considerations. These main influencing factors are summarized in Table 1.

Primary and Secondary School

As mentioned before, in order to attend universities, individuals have to meet basic eligibility to higher education. The study decision does not only depend on personal goals and opinions but on attaining the necessary university entry diploma with appropriate grades. That is why parents’ influence starts a long time before the actual decision has to be made (Lörz et al., 2011).
Several forms of parental involvement lead to better performance in school. Generally it can be said that good parenting practices are important (Kan & Tsai, 2005). This starts with offering the right environment, for example providing housing, food, safety, health, an appropriate study space (Epstein, 2000, cited in Desforges & Abouchaar, 2003), a stable family environment (Haveman & Wolfe, 1995) and ensuring that children get to school on time every day (Sanders & Epstein, 2000). It also means that good grades are positively related with parents’ homework support (Fan & Chen, 2001), reinforcements (Kan & Tsai, 2005), advice (Hachmeister et al., 2007), parent-child discussions (McNeal, 1999), and high expectations¹ (Lörz et al., 2011). Parents’ communication with school about programs and their children’s progress, participation and volunteering showed to have a positive effect on performance as well (McNeal, 1999; Sanders & Epstein, 2000).
While meeting the basic eligibility for higher education is a prerequisite to attend a higher education institution in general, certain programs require high grade averages. In Sweden these grade averages depend on the amount of applicants and differ every semester.
The Swedish Agency for Higher Education Services releases a database every term including the lowest merit values (VHS, 2011). The admission system is complex and there are numerous types of selection groups each with varying maximum points. To give a broad picture the three biggest selection groups have been looked at. Analyzing the data shows that the programs that require the highest scores are medicine, psychology and architecture².
In conclusion, parents should invest time and money into their children’s education. The right investment into children not only by governments but also by parents is the key to high performance in school and to the accumulation of human capital (Becker, 1993). Performance is especially important when someone wants to study a program that requires high scores, meaning that parental influence in those cases is even more present.

1 Introduction
1.1 Purpose
1.2 Research Questions
2 Theoretical Background 
2.1 The Importance of Knowledge
2.2 Parental Influence
3 Methodology 
3.1 The Dataset
3.2 The Regression Model
4 Analysis
4.1 The Individual’s Level of Education
4.2 The Individual’s Field of Study
5 Discussion 
5.1 Recommendations for further research
6 Conclusions
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Parental Influence on Higher Education Attainment Evidence from Sweden