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Title: A Time to Plant and a Time to Reap
Resulting in 1 citation.
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Cunha, Flavio |
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A Time to Plant and a Time to Reap Working Paper, Department of Economics, University of Chicago, January 2007 Cohort(s): Children of the NLSY79, NLSY79 Publisher: Department of Economics, University of Chicago Keyword(s): Armed Forces Qualifications Test (AFQT); Child Development; Family Income; Home Observation for Measurement of Environment (HOME); I.Q.; Intergenerational Patterns/Transmission; Panel Study of Income Dynamics (PSID); Parental Influences; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Peabody Picture Vocabulary Test (PPVT); Skill Formation; Skills; Welfare Permission to reprint the abstract has not been received from the publisher. This paper formulates, identifies, and estimates a multistage model of the production of ability in childhood. The model is based on two features. First, Investments made at different ages of the child are not forced to be perfect substitutes as has been assumed in the previous literature. In the model and in the estimation, I allow the technology to vary according to childhood developmental stages so I can capture the notion of critical and sensitive periods found in the literature of animal and human development. I find evidence for sensitive periods. Second, Parents are subject to lifetime credit constraints. They cannot leave debts to their children. They also face uninsurable productivity shocks in labor income. These market failures distort the equilibrium allocation of investments in the cognitive development of their children. The model's empirically grounded steady-state equilibrium explains a variety of facts about cognitive ability, education, and child development. It correctly predicts selection into college by quartiles of family income and terciles of ability measured at adolescent years. It is consistent with gaps in cognitive ability that are present at very early ages. It reproduces the pattern of selection into college based on cognitive ability. I use the model to evaluate the impact of different remediation policies on the stationary distribution of cognitive ability and welfare. I analyze the effects of a 50% tuition subsidy, a targeted early investment subsidy, and a targeted early and late investment subsidy that is contingent on parental resources. I show that the policy that subsidizes early and late childhood investments dominates the other policies in welfare, since it is the one that generates the highest equivalent variation across all deciles of permanent income. It also generates a stationary distribution of cognitive ability that first-order stochastically dominates the ones generated by the baseline economy and the other remediation policies. |
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Bibliography Citation
Cunha, Flavio. "A Time to Plant and a Time to Reap." Working Paper, Department of Economics, University of Chicago, January 2007. |