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

57 Pages Posted: 16 Mar 2015 Last revised: 12 Jun 2022

See all articles by Elizabeth M. Caucutt

Elizabeth M. Caucutt

University of Western Ontario - Department of Economics

Lance Lochner

University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER)

Youngmin Park

Bank of Canada

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Date Written: March 2015

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 influence 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.

Suggested Citation

Caucutt, Elizabeth M. and Lochner, Lance and Park, Youngmin, Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform so Poorly? (March 2015). NBER Working Paper No. w21023, Available at SSRN: https://ssrn.com/abstract=2578871

Elizabeth M. Caucutt (Contact Author)

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada

Lance Lochner

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Youngmin Park

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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