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Flavio Cunha - Parental Beliefs and Investments in Human Capital

Thursday, May 24, 2018 - 3:30pm to 5:00pm
Spring 2018

Flavio Cunha, Professor of Economics, Rice University

Parental Beliefs and Investments in Human Capital

We shed light on the importance of maternal subjective beliefs in explaining the heterogeneity in investments in the human capital of children. Subjective beliefs about the production function of skills in early childhood development is crucial since parents may have biased beliefs about the returns to investments. To determinate the importance of maternal subjective beliefs, we first show how to convert the answers to a specific set of questions into estimates of expected rates of returns on investment. Next, we relate these estimates to actual maternal behavior. Then, we formulate and estimate a model in which mothers have subjective beliefs about the technology of skill formation in early childhood development. To do so, we draw on detailed and unique data from an early childhood intervention in Colombia. In this intervention, home visitors paid weekly visits to randomly chosen households with the aim of promoting child cognitive and noncognitive development. The intervention targeted poor households with children aged 12 to 24 months at baseline and lasted 18 months. We find that parents think that the productivity of investment is much higher for low initial conditions than higher initial conditions, that beliefs predict investments in the human capital of children, but that the intervention did not shift parental beliefs.

The seminar is co-sponsored by Stanford Center for Education Policy Analysis and Lemann Center for Educational Entrepreneurship and Innovation in Brazil.