Maternal subjective expectations about the technology of skill formation predict investments in children one year later

Flávio Cunha, Irma Elo and Jennifer Culhane

Journal of Econometrics, 2022, vol. 231, issue 1, 3-32

Abstract: A growing literature reports significant socio-economic gaps in investments in the human capital of young children. Because the returns to these investments may be huge, parenting programs attempt to improve children’s environments by increasing parental expectations about the importance of investments for their children’s human capital formation. We contribute to this literature by investigating the relevance of maternal subjective expectations (MSE) about the technology of skill formation in predicting investments in the human capital of children. We develop and implement a framework to elicit and analyze MSE data. We launch a longitudinal study with 822 participants, all of whom were women in the second trimester of their first pregnancy at the date of enrollment. In the first wave of the study, during pregnancy, we elicited the woman’s MSE. In the second wave, approximately one year later, we measured maternal investments using the Home Observation for the Measurement of the Environment (HOME) Inventory. The vast majority of study participants believe that the Cobb–Douglas technology of skill formation describes the process of child development accurately. We observed substantial heterogeneity in MSE about the impact of human capital at birth and investments in child development at age two. Family income explains part of this heterogeneity in MSE. The higher the family income, the higher the MSE about the impact of investment in child development. We find that a one-standard-deviation of MSE measured at pregnancy is associated with 11% of a standard deviation in investments measured when the child is approximately nine months old.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:231:y:2022:i:1:p:3-32

DOI: 10.1016/j.jeconom.2020.07.044

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