The key to forming a family dynasty

Family dynasties have continuously thrived throughout history: The Habsburgs, The Romanovs, The Rothschilds. Many people believe that these families maintain their wealth simply because they have masses of it, however a recent study indicates that there is a much stronger factor which drives financial success from one generation to the next. United Press International reveals the results of the study and their implications:  

Human capital — intelligence, advice, work ethic — may be why high-income fathers have richer sons, U.S. researchers say.

Study author David Sims, an economics professor at Brigham Young University said there’s a correlation between a father’s income and son’s — sons of fathers with high incomes tended to end up with higher than average incomes themselves.

“We wanted to see if the intergenerational income correlation is due to money — what we can buy for our kids — or if human capital attributes passed from father to son play a role as well,” Sims said in a statement.

The study, published in the Journal of Political Economy, found income differences not related to a father’s human capital were weaker predictors of a son’s income, or in other words, human capital matters.

“Differing human capital endowments passed from father to son account for about two-thirds of the overall intergenerational income relationship,” Sims said.

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