IDEAS home Printed from https://ideas.repec.org/p/red/sed017/770.html
   My bibliography  Save this paper

From Childhood to Adult Inequality: Parental Investments and Early Childhood Development

Author

Listed:
  • Diego Daruich

    (New York University)

Abstract

Standard macroeconomic analysis of inequality focuses on the optimal choice of progressive taxation. However, early childhood environment has been shown to significantly impact adult outcomes. Using children's time diaries, we show that parental quality time with children is strongly associated with children's skills—which is later associated with their education. To compare the quantitative role of standard policies to ones that target early childhood, we extend the standard general-equilibrium heterogeneous-agent life-cycle model with earnings risk and credit constraints to allow for endogenous education, parental time and money investments towards children's skill development, and family transfers. The model includes two types of college majors: STEM and non-STEM. We evaluate three policies: progressive taxation, college tuition subsidies, and parenting education. Progressive taxation is the most effective at reducing disposable income inequality, but it does not promote the development of skills necessary to increase college graduation or social mobility. College subsidies promote only non-STEM graduation, since STEM is a better alternative only for high-skilled individuals. Parenting education is the most effective at increasing intergenerational mobility and the only one able to promote STEM graduation.

Suggested Citation

  • Diego Daruich, 2017. "From Childhood to Adult Inequality: Parental Investments and Early Childhood Development," 2017 Meeting Papers 770, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:770
    as

    Download full text from publisher

    File URL: https://economicdynamics.org/meetpapers/2017/paper_770.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Peter Diamond & Emmanuel Saez, 2011. "The Case for a Progressive Tax: From Basic Research to Policy Recommendations," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 165-190, Fall.
    2. Emmanuel Saez, 2017. "Taxing the Rich More: Preliminary Evidence from the 2013 Tax Increase," Tax Policy and the Economy, University of Chicago Press, vol. 31(1), pages 71-120.
    3. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2013. "Education Policy and Intergenerational Transfers in Equilibrium," Working Paper series 15_13, Rimini Centre for Economic Analysis.
    4. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    5. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2017. "Optimal Tax Progressivity: An Analytical Framework," The Quarterly Journal of Economics, Oxford University Press, vol. 132(4), pages 1693-1754.
    6. Checchi, Daniele & Ichino, Andrea & Rustichini, Aldo, 1999. "More equal but less mobile?: Education financing and intergenerational mobility in Italy and in the US," Journal of Public Economics, Elsevier, vol. 74(3), pages 351-393, December.
    7. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 1-41.
    8. Jean-Marie Baland & James A. Robinson, 2000. "Is Child Labor Inefficient?," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 663-679, August.
    9. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-867, June.
    10. Jorge Luis García & James J. Heckman & Duncan Ermini Leaf & María José Prados, 2016. "The Life-cycle Benefits of an Influential Early Childhood Program," NBER Working Papers 22993, National Bureau of Economic Research, Inc.
    11. Conesa, Juan Carlos & Krueger, Dirk, 2006. "On the optimal progressivity of the income tax code," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1425-1450, October.
    12. Barro, Robert J & Becker, Gary S, 1989. "Fertility Choice in a Model of Economic Growth," Econometrica, Econometric Society, vol. 57(2), pages 481-501, March.
    13. Petra E. Todd & Kenneth I. Wolpin, 2003. "On The Specification and Estimation of The Production Function for Cognitive Achievement," Economic Journal, Royal Economic Society, vol. 113(485), pages 3-33, February.
    14. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 129(4), pages 1553-1623.
    15. repec:hrv:faseco:30750027 is not listed on IDEAS
    16. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    17. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    18. Jorge Luis García & James J. Heckman & Duncan Ermini Leaf & María José Prados, 2017. "Quantifying the Life-cycle Benefits of a Prototypical Early Childhood Program," NBER Working Papers 23479, National Bureau of Economic Research, Inc.
    19. Gertler, Paul & Heckman, James & Pinto, Rodrigo & Zanolini, Arianna & Vermeerch, Christel & Walker, Susan & Chang, Susan M. & Grantham-McGregor, Sally, 2013. "Labor Market Returns to Early Childhood Stimulation: A 20-year Followup to an Experimental Intervention in Jamaica," Institute for Research on Labor and Employment, Working Paper Series qt8sz5p9vd, Institute of Industrial Relations, UC Berkeley.
    20. Ozan Bakis & Baris Kaymak & Markus Poschke, 2015. "Transitional Dynamics and the Optimal Progressivity of Income Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 679-693, July.
    21. Alexander Ludwig & Dirk Krueger, 2015. "Optimal Capital and Progressive Labor Income Taxation with Endogenous Schooling Decisions and Intergenerational Transfers," 2015 Meeting Papers 334, Society for Economic Dynamics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. From Childhood to Adult Inequality: Parental Investments and Early Childhood Development
      by Christian Zimmermann in NEP-DGE blog on 2017-10-18 17:55:09

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed017:770. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.