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

46 Pages Posted: 7 Jan 2017 Last revised: 19 Apr 2019

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

Multiple version iconThere are 2 versions of this paper

Date Written: January 2017

Abstract

Early developing and persistent gaps in child achievement by family income combined with the importance of adolescent skill levels for schooling and lifetime earnings suggest that a key component of intergenerational mobility is determined before individuals enter school. After documenting important differences in early child investments by family income, we study four leading mechanisms thought to explain these gaps: intergenerational ability correlation, consumption value of investment, information frictions, and credit constraints. We evaluate whether these mechanisms are consistent with other stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills.

Keywords: Credit constraints, human capital, intergenerational mobility, uncertainty

JEL Classification: D84, D91, I24, I26, J24

Suggested Citation

Caucutt, Elizabeth M. and Lochner, Lance and Park, Youngmin, Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform so Poorly? (January 2017). The Scandinavian Journal of Economics, Vol. 119, Issue 1, pp. 102-147, 2017, Available at SSRN: https://ssrn.com/abstract=2894667 or http://dx.doi.org/10.1111/sjoe.12195

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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