Parental Beliefs about Returns to Different Types of Investments in School Children

In this paper, we study parental beliefs about the returns to different types of investments in school children. Using a representative sample of 1,962 parents in England, we document how parents perceive the returns to parental time investments, material investments and school quality, as well as the complementarity/substitutability between the different inputs. Both parental investments and school quality are perceived to be important and returns are perceived to be diminishing with higher investments. We further find that parental material investments are perceived as more productive if the child attends a high quality school. We find no differences in perceived returns to investments by the child's initial human capital or gender and, surprisingly, by the parents' socioeconomic background. We document a high degree of heterogeneity in perceived returns across respondents and document that perceived returns are highly correlated with actual investment decisions made by parents.