NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Correlation, Consumption, Confusion, or Constraints: Why do Poor Children Perform so Poorly?

Elizabeth M. Caucutt, Lance Lochner, Youngmin Park

NBER Working Paper No. 21023
Issued in March 2015
NBER Program(s):CH, ED, LS, PE

The economic and social mobility of a generation may be largely determined by the time it enters school given early developing and persistent gaps in child achievement by family income and the importance of adolescent skill levels for educational attainment and lifetime earnings. After providing new evidence of important differences in early child investments by family income, we study four leading mechanisms thought to explain these gaps: an intergenerational correlation in ability, a consumption value of investment, information frictions, and credit constraints. In order to better determine which of these mechanisms influence family investments in children, we evaluate the extent to which these mechanisms also explain other important stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills.

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Document Object Identifier (DOI): 10.3386/w21023

Published: Elizabeth M. Caucutt & Lance Lochner & Youngmin Park, 2016. "Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform so Poorly?," The Scandinavian Journal of Economics, .

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