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Intra-household Resource Allocation: Do Parents Reduce or Reinforce Child Cognitive Ability Gaps?

  • Frijters, Paul

    ()

    (University of Queensland)

  • Johnston, David W.

    ()

    (Monash University)

  • Shah, Manisha

    ()

    (University of California, Los Angeles)

  • Shields, Michael A.

    ()

    (Monash University)

Do parents invest more or less in their high ability children? We provide new evidence on this question by comparing observed ability differences and observed investment differences between siblings in the NLSY. To overcome endogeneity issues we use sibling differences in handedness as an instrument for cognitive ability differences, since handedness is a strong determinant of cognitive ability. We find that parents invest more in high ability children, with a one standard deviation increase in child cognitive ability increasing parental investments by approximately one-third of a standard deviation. Consequently, differences in child cognitive ability are enhanced by differential parental investments. This finding has important implications for education policy.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5153.

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Length: 27 pages
Date of creation: Aug 2010
Date of revision:
Publication status: published in: Demography, 2013, 50(6), 2187-2208
Handle: RePEc:iza:izadps:dp5153
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  1. Del Bono, Emilia & Ermisch, John & Francesconi, Marco, 2008. "Intrafamily Resource Allocations: A Dynamic Model of Birth Weight," IZA Discussion Papers 3704, Institute for the Study of Labor (IZA).
  2. Johnston, David W. & Shah, Manisha & Shields, Michael A., 2007. "Handedness, Time Use and Early Childhood Development," IZA Discussion Papers 2752, Institute for the Study of Labor (IZA).
  3. Johnston, David W. & Nicholls, Michael E. R. & Shah, Manisha & Shields, Michael A., 2010. "Handedness, Health and Cognitive Development: Evidence from Children in the NLSY," IZA Discussion Papers 4774, Institute for the Study of Labor (IZA).
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