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Partial insurance and investments in children

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  • Pedro Carneiro
  • Rita Ginja

Abstract

This paper studies the impact of permanent and transitory shocks to income on parental investments in children. We use panel data on family income, and an index of investments in children in time and goods, from the Children of the National Longitudinal Survey of Youth. Consistent with the literature focusing on non-durable expenditure, we find that there is only partial insurance of parental investments against permanent income shocks, but the magnitude of the estimated responses is small. We cannot reject the hypothesis full insurance against temporary shocks. Another interpretation of our findings is that there is very little insurance available, but the fact that skill is a non-separable function of parental investments over time results in small reactions of these investments to income shocks, especially at later ages.

Suggested Citation

  • Pedro Carneiro & Rita Ginja, 2015. "Partial insurance and investments in children," CeMMAP working papers 19/15, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:19/15
    DOI: 10.1920/wp.cem.2015.1915
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    References listed on IDEAS

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    1. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, September.
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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