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The (Lack of) Anticipatory Effects of the Social Safety Net on Human Capital Investment

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  • Manasi Deshpande
  • Rebecca Dizon-Ross

Abstract

How does the expectation that a child will receive government benefits in adulthood affect parental investments in the child's human capital? Most parents whose children receive Supplemental Security Income (SSI) benefits overestimate the likelihood that their child will receive SSI benefits in adulthood. We present randomly selected families with the predicted likelihood that their child will receive SSI benefits in adulthood. Reducing parents' expectations that children will receive benefits in adulthood does not increase investments in children's human capital. This zero effect is precisely estimated. Likely explanations include parents working more themselves, nonfinancial goals influencing investment, and families facing investment constraints.

Suggested Citation

  • Manasi Deshpande & Rebecca Dizon-Ross, 2023. "The (Lack of) Anticipatory Effects of the Social Safety Net on Human Capital Investment," American Economic Review, American Economic Association, vol. 113(12), pages 3129-3172, December.
    • Handle: RePEc:aea:aecrev:v:113:y:2023:i:12:p:3129-72
    DOI: 10.1257/aer.20230010
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    More about this item

    JEL classification:

    • G52 - Financial Economics - - Household Finance - - - Insurance
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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