IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v63y2022i4d10.1007_s00181-021-02184-3.html
   My bibliography  Save this article

Sooner or later? The impact of child education on household consumption

Author

Listed:
  • Carmen Aina

    (University of Eastern Piedmont)

  • Daniela Sonedda

    (University of Eastern Piedmont
    Centre for North South Economic Research (CRENoS))

Abstract

We study the impact of one more year of child’s education on household (non-durable) consumption. We exploit an exogenous shock generated by a university reform in Italy in the early 2000s. We find that families responded in a way that is consistent with education as a production good. The higher child’s education produced household positive, permanent income innovations. Hence, family non-durable consumption increased. Our findings suggest that education can be an insurance device against adverse permanent income shocks. The 2001 reform not only positively affected offspring’s years of schooling, but it also had a positive effect to boost household consumption.

Suggested Citation

  • Carmen Aina & Daniela Sonedda, 2022. "Sooner or later? The impact of child education on household consumption," Empirical Economics, Springer, vol. 63(4), pages 2071-2099, October.
    • Handle: RePEc:spr:empeco:v:63:y:2022:i:4:d:10.1007_s00181-021-02184-3
    DOI: 10.1007/s00181-021-02184-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-021-02184-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-021-02184-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rong Hai & James Heckman, 2017. "Inequality in Human Capital and Endogenous Credit Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 4-36, April.
    2. Richard Blundell & Monica Costa Dias, 2009. "Alternative Approaches to Evaluation in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
    3. Robert T. Michael, 1972. "The Effect of Education on Efficiency in Consumption," NBER Books, National Bureau of Economic Research, Inc, number mich72-1, June.
    4. Pedro Carneiro & Rita Ginja, 2016. "Partial Insurance and Investments in Children," Economic Journal, Royal Economic Society, vol. 126(596), pages 66-95, October.
    5. Grossman, Michael, 2006. "Education and Nonmarket Outcomes," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 10, pages 577-633, Elsevier.
    6. Di Pietro, Giorgio & Cutillo, Andrea, 2008. "Degree flexibility and university drop-out: The Italian experience," Economics of Education Review, Elsevier, vol. 27(5), pages 546-555, October.
    7. Joseph G. Altonji & Ling Zhong, 2021. "The Labor Market Returns to Advanced Degrees," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 303-360.
    8. Lazear, Edward P, 1977. "Education: Consumption or Production?," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 569-597, June.
    9. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-963, December.
    10. Hamish Low & Costas Meghir & Luigi Pistaferri, 2010. "Wage Risk and Employment Risk over the Life Cycle," American Economic Review, American Economic Association, vol. 100(4), pages 1432-1467, September.
    11. Ana Rute Cardoso, 2008. "Demand for Higher Education Programs: The Impact of the Bologna Process," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 229-247, June.
    12. Anders Björklund & Markus Jäntti & John Roemer, 2012. "Equality of opportunity and the distribution of long-run income in Sweden," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(2), pages 675-696, July.
    13. Richard Blundell & Luigi Pistaferri & Ian Preston, 2008. "Consumption Inequality and Partial Insurance," American Economic Review, American Economic Association, vol. 98(5), pages 1887-1921, December.
    14. Tullio Jappelli & Luigi Pistaferri, 2020. "Permanent Income Shocks, Target Wealth, and the Wealth Gap," NBER Working Papers 27709, National Bureau of Economic Research, Inc.
    15. Michael, Robert T, 1973. "Education in Nonmarket Production," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 306-327, Part I, M.
    16. Martin Huber & Giovanni Mellace, 2015. "Testing Instrument Validity for LATE Identification Based on Inequality Moment Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 398-411, May.
    17. Daniele Bondonio & Fabio Berton, 2018. "The Impact of Degree Duration on Higher Education Participation: Evidence from a Large‐scale Natural Experiment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(5), pages 905-930, October.
    18. Richard Blundell & Rosa L. Matzkin, 2014. "Control functions in nonseparable simultaneous equations models," Quantitative Economics, Econometric Society, vol. 5, pages 271-295, July.
    19. Tullio Jappelli & Luigi Pistaferri, 2006. "Intertemporal Choice and Consumption Mobility," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 75-115, March.
    20. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2014. "Consumption and Labor Supply with Partial Insurance: An Analytical Framework," American Economic Review, American Economic Association, vol. 104(7), pages 2075-2126, July.
    21. Tullio Jappelli & Luigi Pistaferri, 2025. "Permanent Income Shocks, Target Wealth, and the Wealth Gap," American Economic Journal: Macroeconomics, American Economic Association, vol. 17(1), pages 102-125, January.
    22. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
    23. Pedro Carneiro & Rita Ginja, 2016. "Partial Insurance and Investments in Children," Economic Journal, Royal Economic Society, vol. 126(596), pages 66-95, October.
    24. Francesco C. Billari & Guido Tabellini, 2010. "Italians Are Late: Does It Matter?," NBER Chapters, in: Demography and the Economy, pages 371-412, National Bureau of Economic Research, Inc.
    25. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
    26. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    27. Marco Manacorda & Enrico Moretti, 2006. "Why do Most Italian Youths Live with Their Parents? Intergenerational Transfers and Household Structure," Journal of the European Economic Association, MIT Press, vol. 4(4), pages 800-829, June.
    28. Sabrina Hahm & Jochen Kluve, 2019. "Better with Bologna? Tertiary education reform and student outcomes," Education Economics, Taylor & Francis Journals, vol. 27(4), pages 425-449, July.
    29. Isaiah Andrews, 2018. "Valid Two-Step Identification-Robust Confidence Sets for GMM," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 337-348, May.
    30. Rong Hai & James Heckman, 2017. "Inequality in Human Capital and Endogenous Credit Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 4-36, April.
    31. Edward Vytlacil, 2002. "Independence, Monotonicity, and Latent Index Models: An Equivalence Result," Econometrica, Econometric Society, vol. 70(1), pages 331-341, January.
    32. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
    33. Ofer Malamud & Cristian Pop-Eleches, 2010. "General Education versus Vocational Training: Evidence from an Economy in Transition," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 43-60, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiaoxue Liu & Fuzhen Cao & Shuangshuang Fan, 2022. "Does Human Capital Matter for China’s Green Growth?—Examination Based on Econometric Model and Machine Learning Methods," IJERPH, MDPI, vol. 19(18), pages 1-27, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. C. Aina & D. Sonedda, 2018. "Investment in education and household consumption," Working Paper CRENoS 201806, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    2. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2019. "Education Policy and Intergenerational Transfers in Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2569-2624.
    3. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2013. "Education Policy�and Intergenerational Transfers in Equilibrium," Cowles Foundation Discussion Papers 1887, Cowles Foundation for Research in Economics, Yale University.
    4. Salvador Navarro & Jin Zhou, 2017. "Identifying Agent's Information Sets: an Application to a Lifecycle Model of Schooling, Consumption, and Labor Supply," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 58-92, April.
    5. Salvador Navarro & Jin Zhou, 2017. "Identifying Agent's Information Sets: an Application to a Lifecycle Model of Schooling, Consumption, and Labor Supply," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 58-92, April.
    6. Belzil, Christian, 2007. "The return to schooling in structural dynamic models: a survey," European Economic Review, Elsevier, vol. 51(5), pages 1059-1105, July.
    7. Sunha Myong & Jungho Lee, 2019. "Self-financing, Parental Transfer, and College Education," 2019 Meeting Papers 106, Society for Economic Dynamics.
    8. Rasmus Landersø & James J. Heckman, 2017. "The Scandinavian Fantasy: Sources of Intergenerational Mobility in Denmark and the US," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(1), pages 178-230, January.
    9. Balmaceda, Felipe, 2021. "A failure of the market for college education and on-the-job human capital," Economics of Education Review, Elsevier, vol. 84(C).
    10. Emma Tominey, 2010. "The Timing of Parental Income and Child Outcomes: The Role of Permanent and Transitory Shocks," CEE Discussion Papers 0120, Centre for the Economics of Education, LSE.
    11. Christian Belzil & Arnaud Maurel & Modibo Sidibé, 2021. "Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 361-395.
    12. Ferreyra,Maria Marta & Garriga,Carlos & Martin,Juan David & Sanchez Diaz,Angelica Maria, 2020. "Raising College Access and Completion : How Much Can Free College Help ?," Policy Research Working Paper Series 9428, The World Bank.
    13. George Bulman & Robert Fairlie & Sarena Goodman & Adam Isen, 2021. "Parental Resources and College Attendance: Evidence from Lottery Wins," American Economic Review, American Economic Association, vol. 111(4), pages 1201-1240, April.
    14. Pedro Carneiro & James J. Heckman & Edward J. Vytlacil, 2011. "Estimating Marginal Returns to Education," American Economic Review, American Economic Association, vol. 101(6), pages 2754-2781, October.
    15. Christian Belzil & Jörgen Hansen, 2020. "The evolution of the US family income–schooling relationship and educational selectivity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(7), pages 841-859, November.
    16. Hofmarcher, Thomas, 2021. "The effect of education on poverty: A European perspective," Economics of Education Review, Elsevier, vol. 83(C).
    17. Elizabeth M. Caucutt & Lance Lochner, 2020. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1065-1147.
    18. List, John A. & Rasul, Imran, 2011. "Field Experiments in Labor Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 2, pages 103-228, Elsevier.
    19. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 12, pages 697-812, Elsevier.
    20. Ross Levine & Yona Rubinstein, 2013. "Liberty for More: Finance and Educational Opportunities," NBER Working Papers 19380, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Demand for schooling; Household consumption; Human Capital;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:63:y:2022:i:4:d:10.1007_s00181-021-02184-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.