Working Paper: NBER ID: w26732
Authors: James Berry; Rebecca Dizon-Ross; Maulik Jagnani
Abstract: We conduct a lab-in-the-field experiment to identify parents' preferences for investing in their children. The experiment exogenously varied the short-run returns to educational investments to identify how much parents care about maximizing total household earnings, minimizing cross-sibling inequality in "outcomes" (child-level earnings), and minimizing cross-sibling inequality in "inputs" (child-level investments). We show that while parents place some weight on maximizing earnings, they also display a strong preference for equality in inputs, forgoing roughly 40% of their potential earnings or 90% of a day’s wage to equalize inputs. We find no evidence that parents care about equalizing outcomes.
Keywords: Parental investment; Fairness preferences; Inequality aversion; Educational outcomes
JEL Codes: I20; J13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parents exhibit a preference for equality in inputs (D10) | Parents forgo potential earnings (J17) |
| Parents forgo potential earnings (J17) | Parents equalize inputs across children (D15) |
| Expected payment gains from maximizing returns increase (G19) | Parents still choose to equalize inputs (D15) |
| Parents sacrifice money to invest equally (D14) | Parents display a preference for equality in inputs (D10) |
| Parents do not care about equalizing outcomes (I24) | Parents' investment decisions are not influenced by expected earnings (G11) |