Working Paper: NBER ID: w25596
Authors: Daniela Del Boca; Christopher J. Flinn; Ewout Verriest; Matthew J. Wiswall
Abstract: We construct and estimate a model of child development in which both the parents and children make investments in the child’s skill development. In each period of the development process, partially altruistic parents act as the Stackelberg leader and the child the follower when setting her own study time. We then extend this non-cooperative form of interaction by allowing parents to offer incentives to the child to increase her study time, at some monitoring cost. We show that this incentive scheme, a kind of internal conditional cash transfer, produces efficient outcomes and, in general, increases the child’s cognitive ability. In addition to heterogeneity in resources (wage offers and non-labor income), the model allows for heterogeneity in preferences both for parents and children, and in monitoring costs. Like their parents, children are forward-looking, but we allow children and parents to have different preferences and for children to have age-varying discount rates, becoming more “patient” as they age. Using detailed time diary information on the allocation of parent and child time linked to measures of child cognitive ability, we estimate several versions of the model. Using model estimates, we explore the impact of various government income transfer policies on child development.
Keywords: No keywords provided
JEL Codes: J13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental investment (time and resources) (J22) | child cognitive ability (G53) |
| Parental incentives (J13) | child study time (C92) |
| child study time (C92) | child cognitive ability (G53) |
| Parental income (D31) | child study time (C92) |
| Government income transfer policies (H53) | child development (J13) |