EconPapers    
Economics at your fingertips  
 

Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments

Elizabeth Caucutt, Lance Lochner, Joseph Mullins () and Youngmin Park
Additional contact information
Joseph Mullins: University of Western Ontario

No 2020-076, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: This paper studies the multidimensional nature of investments in children within a dynamic framework. In particular, we examine the roles of parental time investments, purchased home goods/services inputs, and market-based child care services. We first document strong increases in total investment expenditures by maternal education; yet, expenditure shares, which skew heavily towards parental time, vary little with parental schooling. Second, we develop an intergenerational lifecycle model with multiple child investment inputs to study these patterns and the impacts of policies that alter the prices of different inputs. We analytically characterize investment behavior, focusing on the substitutability of different investment inputs and the way parental skills affect the productivity of family-based inputs. Third, we develop an estimation strategy that exploits intratemporal optimality conditions based on relative demand to estimate substitutability between inputs, the relative productivity of different inputs, and the role played by parental education. This approach requires no assumptions about the dynamics of skill investment, preferences, or credit markets. We also account for mis-measured inputs and wages, as well as unobserved heterogeneity in parenting skills. We further show how noisy measures of child achievement (measured several years apart) can also be incorporated in a GMM approach to additionally identify the dynamics of skill accumulation. Fourth, we use data from the Child Development Supplement of the Panel Study of Income Dynamics to estimate the skill production technology for children ages 12 and younger. Our estimates suggest complementarity between parental time and home goods/services inputs as well as between these family-based inputs and market-based child care, with elasticities of substitution ranging from 0.2 to 0.5. We find no systematic effects of parental education on the relative productivity of parental time and other home inputs. Finally, we use counterfactual simulations to explore the extent and sources of variation in investments across families, as well as investment responses to changes in input prices. We find that variation in prices explains 48% of the overall variance in investment expenditures, and differences in wages explain more than half of the investment expenditure gap between college and non-college educated parents. We further show that accounting for the degree of input complementarity implied by our estimates has important implications for the responses of individual inputs to any price change and for the responses in total investments and skill accumulation to large (but not small) price changes.

Keywords: parental investments; parental inputs; PSID; Child Development (search for similar items in EconPapers)
JEL-codes: C33 J13 J24 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-neu
Note: M
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Caucut ... skill-production.pdf First version, July 8, 2020 (application/pdf)

Related works:
Working Paper: Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments (2020) Downloads
Working Paper: Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments (2020) Downloads
Working Paper: Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hka:wpaper:2020-076

Access Statistics for this paper

More papers in Working Papers from Human Capital and Economic Opportunity Working Group Contact information at EDIRC.
Bibliographic data for series maintained by Jennifer Pachon ().

 
Page updated 2024-07-16
Handle: RePEc:hka:wpaper:2020-076