Finance and Children’s Academic Performance
What is the impact of regulatory reforms that enhance credit market efficiency on children’s human capital? Using a parent-child panel dataset, we find that such reforms reduced children’s academic performance in low-income families. Consistent with the view that financial development entices low-income parents to substitute out of childrearing and into employment with adverse effects on children’s education, we find that among low-income families, regulatory reforms: increased mother’s employment hours, reduced parental supervision and parent-child discussions about school and college, and had bigger adverse effects when mothers were not already working full-time and grandparents were not living with the child.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.