Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock

Patrick Agte, Arielle Bernhardt, Erica Field, Rohini Pande and Natalia Rigol

American Economic Review, 2024, vol. 114, issue 9, 2792-2824

Abstract: Poor entrepreneurs must frequently choose between business investment and children's education. To examine this trade-off, we exploit experimental variation in short-run microenterprise growth among a sample of Indian households and track schooling and business out-comes over eleven years. Treated households, who experience higher initial microenterprise growth, are on average one-third more likely to send children to college. However, educational investment and schooling gains are concentrated among literate-parent households, whose enterprises eventually stagnate. In contrast, illiterate-parent households experience long-run business gains but declines in children's education. Our findings suggest that microenterprise growth has the potential to reduce relative intergenerational educational mobility.

JEL-codes: I21 I26 I32 J13 L25 L26 O12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/aer.20220296

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