The Timing of Parental Income and Child Outcomes: The Role of Permanent and Transitory Shocks

Emma Tominey

CEE Discussion Papers from Centre for the Economics of Education, LSE

Abstract: How do shocks to parental income drive adolescent human capital, including years of schooling, high school dropout, university attendance, IQ and health? A structural model decomposes household shocks into permanent and transitory components, then the effect of shocks at age 1-16 is estimated for 600,000 Norwegian children. The effect of permanent shocks declines - and of transitory shocks is small and constant across child age, suggesting parents optimise similarly to consumption. However there is a lower effect of transitory shocks for liquidity constrained parents. An interpretation is that these parents use income shocks for essential consumption rather than investment.

Keywords: Income; pupil outcomes; shocks (search for similar items in EconPapers)
JEL-codes: D12 J13 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:cep:ceedps:0120

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