Income inequality and educational expenditures on children: Evidence from the China Family Panel Studies

Yuanyuan Chen, Meng Yuan and Min Zhang

China Economic Review, 2023, vol. 78, issue C

Abstract: Using the data from the China Family Panel Studies from 2010 to 2018, we find that rising income inequality causes parents to spend more on children’s education, both in school and out of school. The impact of income inequality on out-of-school expenditures is significant at intensive and extensive margins, especially for study-related tutoring participation. Furthermore, we find some empirical evidence suggesting that in response to rising inequality, mothers spend more time on children’s education and there exists a substitution effect between time and money. Further analysis suggests two potential reasons for the rising education spending: (1) a higher income inequality resulting from rising skill premium strengthens parents’ long-lasting cultural attitude towards education to higher levels, inducing them to spend more on educational investment, and (2) a higher income inequality increases the value of higher education, leading to a stronger demand for better educational opportunities, and then, more intense education competition, forcing parents to invest more in education.

Keywords: Income inequality; Educational expenditures; Cultural norms; Education competition; Chinese economy (search for similar items in EconPapers)
JEL-codes: D12 D63 D82 I21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:78:y:2023:i:c:s1043951x23000172

DOI: 10.1016/j.chieco.2023.101932

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