 Beliefs, parental investments, and intergenerational persistence: A formal modelAnders Hjorth-Trolle Rationality and Society, 2018, vol. 30, issue 1, 108-154 Abstract: Empirical research documents persistent socioeconomic and race gaps in parental investments in children. This article presents a formal model that describes the process through which parents’ beliefs about the returns on investments in children evolve over time in light of new information that they receive regarding the outcomes of past investments. The model, which is based on Bayesian learning, accounts for how parents of low socioeconomic status may come to underinvest in their children because they have false low beliefs about the returns on investments. Moreover, the model describes how beliefs are transmitted across generations, thus creating dynasties of underinvesting parents who reproduce inequalities in children’s socioeconomic outcomes. Finally, this article uses National Longitudinal Survey of Youth data to provide illustrative empirical evidence on key aspects of the proposed model. The main contribution of this article is to integrate parents’ beliefs about returns on investments into existing models of intergenerational transmissions. Keywords: Beliefs; formal modeling; intergenerational transmission of resources; parental investments; rational choice theory; utility function (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:ratsoc:v:30:y:2018:i:1:p:108-154 Access Statistics for this article More articles in Rationality and Society |
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