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Parental Beliefs and Investment in Children: The Distortionary Impact of Schools

Author

Listed:
  • Josh Kinsler

    () (University of Georgia)

  • Ronni Pavan

    () (Rochester University)

Abstract

Parental investments in early childhood have been shown to have a large impact on skill acquisition. In this paper, we examine how beliefs about a child's relative skill influences investment and how these beliefs are determined. Using data from the ECLS-K, we first show that parental beliefs about a child's skill relative to children of the same age is distorted by a child's skill relative to children in the same school. In other words, parents of children attending schools with high (low) average skills tend to believe their child is lower (higher) in the overall skill distribution. We then show that beliefs about a child's skill relative to children of the same age affects parental investments such as helping with homework or hiring a tutor. Thus, parents are making important investment decisions using inaccurate information. Building off our descriptive findings, we develop a model of parental investment that incorporates uncertainty about the average skill level of similarly aged children. We estimate the model using indirect inference and perform a set of counterfactuals where parents are fully informed about the average skill level in the population. We find that investment and achievement rise by a considerable amount for students at the bottom of the skill distribution. The mechanism behind this result is that parents of children in relatively low achieving schools revise upward their beliefs about the average child in the population, inducing an investment response.

Suggested Citation

  • Josh Kinsler & Ronni Pavan, 2016. "Parental Beliefs and Investment in Children: The Distortionary Impact of Schools," Working Papers 2016-029, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2016-029
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/kinsler_pavan_2016_parental-beliefs-distortionary.pdf
    File Function: First version, May 2016
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    References listed on IDEAS

    as
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    Cited by:

    1. Jere R. Behrman & Flávio Cunha & Esteban Puentes & Fan Wang, 2018. "You Are What Your Parents Think: Height and Local Reference Points," PIER Working Paper Archive 18-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 22 Apr 2018.

    More about this item

    Keywords

    parental investments; skill development; parental bias;

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • D10 - Microeconomics - - Household Behavior - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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