Why do Parents Underinvest in their Children's Education? Evidence from China

Jiyuan Wang, Rob Alessie and Viola Angelini

No 1027, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: In this paper we study whether the presence of binding liquidity constraints and the existence of fixed costs can explain the underinvestment of parents in their children's human capital. We first incorporate these two potential mechanisms into the theoretical model of Raut & Tran (2005) and then we test their empirical relevance using data from the China Health and Retirement Longitudinal Study (CHARLS). Our results show that especially fixed costs play an important role in explaining human capital underinvestment.

Keywords: Two-Sided Altruism; Human Capital; Liquidity Constraints; Fixed Costs (search for similar items in EconPapers)
JEL-codes: I2 J24 J31 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cna
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1027

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