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Intra-household Resource Allocation: Do Parents Reduce or Reinforce Child Cognitive Ability Gaps?

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  • Frijters, Paul

    (London School of Economics)

  • Johnston, David W.

    (Monash University)

  • Shah, Manisha

    (University of California, Berkeley)

  • Shields, Michael A.

    (Monash University)

Abstract

Do parents invest more or less in their high ability children? We provide new evidence on this question by comparing observed ability differences and observed investment differences between siblings in the NLSY. To overcome endogeneity issues we use sibling differences in handedness as an instrument for cognitive ability differences, since handedness is a strong determinant of cognitive ability. We find that parents invest more in high ability children, with a one standard deviation increase in child cognitive ability increasing parental investments by approximately one-third of a standard deviation. Consequently, differences in child cognitive ability are enhanced by differential parental investments. This finding has important implications for education policy.

Suggested Citation

  • Frijters, Paul & Johnston, David W. & Shah, Manisha & Shields, Michael A., 2010. "Intra-household Resource Allocation: Do Parents Reduce or Reinforce Child Cognitive Ability Gaps?," IZA Discussion Papers 5153, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5153
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    3. Iryna Hayduk & Maude Toussaint‐Comeau, 2022. "Determinants of noncognitive skills: Mediating effects of siblings' interaction and parenting quality," Contemporary Economic Policy, Western Economic Association International, vol. 40(4), pages 677-694, October.
    4. Kamble, Vaibhav, 2021. "Health Returns to Birth Weight: Evidence from Developing Countries," MPRA Paper 105150, University Library of Munich, Germany.
    5. Michael Grätz & Florencia Torche, 2016. "Compensation or Reinforcement? The Stratification of Parental Responses to Children’s Early Ability," Demography, Springer;Population Association of America (PAA), vol. 53(6), pages 1883-1904, December.
    6. Jessica Leight & Elaine M. Liu, 2020. "Maternal Education, Parental Investment, and Noncognitive Characteristics in Rural China," Economic Development and Cultural Change, University of Chicago Press, vol. 69(1), pages 213-251.
    7. Nicoletti, Cheti & Tonei, Valentina, 2017. "The Response of Parental Time Investments to the Child's Skills and Health," IZA Discussion Papers 10993, Institute of Labor Economics (IZA).
    8. Hamid NoghaniBehambari & Farzaneh Noghani & Nahid Tavassoli, 2021. "Early-life Income Shocks and Old-Age Cause-Specific Mortality," Papers 2101.03943, arXiv.org.
    9. Jessica Leight & Paul Glewwe & Albert Park, 2015. "The Impact of Early Childhood Rainfall Shocks on the Evolution of Cognitive and Non-cognitive Skills," Department of Economics Working Papers 2016-14, Department of Economics, Williams College, revised Oct 2016.
    10. Jia Wu & Jiada Lin & Xiao Han, 2023. "Compensation for girls in early childhood and its long-run impact: family investment strategies under rainfall shocks," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1225-1268, July.
    11. Abufhele, Alejandra & Behrman, Jere & Bravo, David, 2017. "Parental preferences and allocations of investments in children's learning and health within families," Social Science & Medicine, Elsevier, vol. 194(C), pages 76-86.
    12. Lukáš Lafférs & Bernhard Schmidpeter, 2021. "Early child development and parents' labor supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(2), pages 190-208, March.
    13. Brandon J. Restrepo, 2016. "Parental investment responses to a low birth weight outcome: who compensates and who reinforces?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(4), pages 969-989, October.
    14. Cho, Seungyeon, 2021. "Is handedness exogenously determined? Counterevidence from South Korea," Economics & Human Biology, Elsevier, vol. 43(C).
    15. Upalat Korwatanasakul, 2023. "Returns to Schooling in Thailand: Evidence from the 1978 Compulsory Schooling Law," The Developing Economies, Institute of Developing Economies, vol. 61(1), pages 3-35, March.
    16. Wei Fan & Catherine Porter, 2020. "Reinforcement or compensation? Parental responses to children’s revealed human capital levels," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(1), pages 233-270, January.
    17. Jorge García Hombrados, 2017. "Cognitive Skills and Intra-Household Allocation of Schooling," Working Paper Series 1817, Department of Economics, University of Sussex Business School.
    18. Cuihong Long & Jiajun Han & Chengzhi Yi, 2020. "Does the Effect of Internet Use on Chinese Citizens’ Psychological Well-Being Differ Based on Their Hukou Category?," IJERPH, MDPI, vol. 17(18), pages 1-21, September.
    19. Jorge Garcia Hombrados, 2018. "Empirical essays on development economics," Economics PhD Theses 0318, Department of Economics, University of Sussex Business School.
    20. Jessica Leight & Elaine M. Liu, 2016. "Maternal Education, Parental Investment and Non-Cognitive Skills in Rural China," NBER Working Papers 22233, National Bureau of Economic Research, Inc.
    21. Irina Horoi & Moiz Bhai, 2018. "New Evidence On National Board Certification As A Signal Of Teacher Quality," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1185-1201, April.
    22. Gonzalez, Kathryn E., 2020. "Within-family differences in Head Start participation and parent investment," Economics of Education Review, Elsevier, vol. 74(C).
    23. Raitzer, David & Batmunkh, Odbayar & Yarcia, Damaris, 2021. "Intrahousehold Responses to Imbalanced Human Capital Subsidies: Evidence from the Philippine Conditional Cash Transfer Program," ADB Economics Working Paper Series 645, Asian Development Bank.

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    More about this item

    Keywords

    handedness; parental investment; cognitive ability; children;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J1 - Labor and Demographic Economics - - Demographic Economics

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