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Why do Parents Underinvest in their Children's Education? Evidence from China

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  • Wang, Jiyuan
  • Alessie, Rob
  • Angelini, Viola

Abstract

In this paper we study whether the presence of binding liquidity constraints and the existence of fixed costs can explain the underinvestment of parents in their children's human capital. We first incorporate these two potential mechanisms into the theoretical model of Raut & Tran (2005) and then we test their empirical relevance using data from the China Health and Retirement Longitudinal Study (CHARLS). Our results show that especially fixed costs play an important role in explaining human capital underinvestment.

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  • Wang, Jiyuan & Alessie, Rob & Angelini, Viola, 2022. "Why do Parents Underinvest in their Children's Education? Evidence from China," GLO Discussion Paper Series 1027, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1027
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    Cited by:

    1. Lu, Xiaomeng & He, Zehui & Li, Yaling & Luo, Ronghua, 2025. "Post-compulsory education of children and household asset allocation," Pacific-Basin Finance Journal, Elsevier, vol. 89(C).

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    Keywords

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • I2 - Health, Education, and Welfare - - Education

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