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Reinforcement or compensation? Parental responses to children’s revealed human capital levels

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  • Wei Fan

    () (Heriot-Watt University)

  • Catherine Porter

    () (Lancaster University Management School)

Abstract

A small but increasing body of literature finds that parents invest in their children unequally. However, the evidence is contradictory, and providing convincing causal evidence of the effect of child ability on parental investment in a low-income context is challenging. This paper examines how parents respond to the differing abilities of primary school-aged Ethiopian siblings, using rainfall shocks during the critical developmental period between pregnancy and the first 3 years of a child’s life to isolate exogenous variations in child ability within the household, observed at a later stage than birth. The results show that on average parents attempt to compensate disadvantaged children through increased cognitive investment. The effect is significant, but small in magnitude: parents provide about 3.9% of a standard deviation more in educational fees to the lower-ability child in the observed pair. We provide suggestive evidence that families with educated mothers, smaller household size and higher wealth compensate with greater cognitive resources for a lower-ability child.

Suggested Citation

  • Wei Fan & Catherine Porter, 2020. "Reinforcement or compensation? Parental responses to children’s revealed human capital levels," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(1), pages 233-270, January.
  • Handle: RePEc:spr:jopoec:v:33:y:2020:i:1:d:10.1007_s00148-019-00752-7
    DOI: 10.1007/s00148-019-00752-7
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    More about this item

    Keywords

    Children; Human capital formation; Parental investment; Intrahousehold resource allocation;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J1 - Labor and Demographic Economics - - Demographic Economics

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