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Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform So Poorly?

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Abstract

The economic and social mobility of a generation may be largely determined by the time it enters school given early developing and persistent gaps in child achievement by family income and the importance of adolescent skill levels for educational attainment and lifetime earnings. After providing new evidence of important differences in early child investments by family income, we study four leading mechanisms thought to explain these gaps: an intergenerational correlation in ability, a consumption value of investment, information frictions, and credit constraints. In order to better determine which of these mechanisms inf uence family investments in children, we evaluate the extent to which these mechanisms also explain other important stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills.

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  • Elizabeth M. Caucutt & Lance Lochner & Youngmin Park, 2015. "Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform So Poorly?," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20153, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
  • Handle: RePEc:uwo:hcuwoc:20153
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    Cited by:

    1. Teodora Boneva & Christopher Rauh, 2015. "Parental Beliefs about Returns to Educational Investments: The Later the Better?," Working Papers 2015-019, Human Capital and Economic Opportunity Working Group.
    2. Elizabeth M. Caucutt & Lance Lochner, 2012. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," NBER Working Papers 18493, National Bureau of Economic Research, Inc.
    3. Urvi Neelakantan & Ivan Vidangos & Felicia Ionescu & Kartik Athreya, 2016. "Investment Opportunities and the Sources of Lifetime Inequality," 2016 Meeting Papers 1177, Society for Economic Dynamics.
    4. Youngmin Park, 2018. "Inequality in Parental Transfers, Borrowing Constraints, and Optimal Higher Education Subsidies," 2018 Meeting Papers 623, Society for Economic Dynamics.
    5. Francesco Agostinelli & Matthew Wiswall, 2016. "Estimating the Technology of Children's Skill Formation," NBER Working Papers 22442, National Bureau of Economic Research, Inc.
    6. Orazio Attanasio & Teodora Boneva & Christopher Rauh, 2018. "Parental Beliefs about Returns to Different Types of Investments in School Children," Working Papers 2018-032, Human Capital and Economic Opportunity Working Group.
    7. 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.
    8. Marti Mestieri & Johanna Schauer & Robert Townsend, 2017. "Human Capital Acquisition and Occupational Choice: Implications for Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 151-186, April.

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    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • I00 - Health, Education, and Welfare - - General - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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