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The Great Recession, Household Income, and Children's Test Scores

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  • Mark E. McGovern
  • Slawa Rokicki

Abstract

The Great Recession had a major impact on the economic welfare of households worldwide. We examine how income changes during the recession were associated with children's educational performance in Ireland, one of the most affected countries. Using longitudinal data on standardised numerical and verbal test scores, collected before and after the height of the recession when cohort members were aged 9 and 13, we compare regression results from random effects and fixed effects models. The latter account for time invariant omitted variables that are potential common causes of both household income and academic performance. We also investigate non-linearities and effect heterogeneity using quantile regression. Log household income is correlated with reading and maths test scores in the random effects models for both girls and boys. Quantile results suggest that, for boys, those with high ability are less affected. However, in the fixed effects models the coefficients are attenuated by more than 50%. We find similar results using subjective perception of exposure to financial losses in place of household income. Overall, there is little evidence of short-run negative effects of income losses during the Great Recession on children's educational performance. In this paper we estimate the effect of transitory shocks; further data are required to isolate the impact of permanent income and any long-run impacts.

Suggested Citation

  • Mark E. McGovern & Slawa Rokicki, 2018. "The Great Recession, Household Income, and Children's Test Scores," CHaRMS Working Papers 18-05, Centre for HeAlth Research at the Management School (CHaRMS).
  • Handle: RePEc:qub:charms:1805
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    1. Slawa Rokicki & Mark E. McGovern, 2020. "Heterogeneity in Early Life Investments: A Longitudinal Analysis of Children's Time Use," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(3), pages 647-676, September.

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    More about this item

    Keywords

    Human Capital; Test Scores; Inequality; Great Recession; Early Life Conditions; Fixed Effects; Quantile Panel Regression;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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