The psychological effects of poverty on investments in children’s human capital

Guilherme Lichand, Eric Bettinger, Nina Cunha and Ricardo Madeira

No 349, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: Do poor parents respond inefficiently to future returns on investments, even when they would have the financial means to invest optimally? Combining multiple experiments, we document that when parents of high-school students in Brazil are offered the opportunity to invest in an educational program, (1) prior experience with the program closes the gap in willingness to invest between high- and low-SES parents, but (2) financial worries reopen that gap. We show that financial worries lead parents to respond to small but immediate returns as if they were large, and to large but future returns as if they were small.

Keywords: Psychology of poverty; attention misallocation (search for similar items in EconPapers)
JEL-codes: C93 D91 E24 I25 I26 (search for similar items in EconPapers)
Date: 2020-06, Revised 2021-04
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:349

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