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Source: University College London
Resulting in 1 citation.
1. Ginja, Rita
Income Shocks and Investments in Human Capital
Working Paper, University College London, London, England, January, 2010.
Cohort(s): Children of the NLSY79, NLSY79
Publisher: University College London
Keyword(s): American Time Use Survey (ATUS); Behavior Problems Index (BPI); Consumer Expenditure Survey (CEX); Family Income; Home Observation for Measurement of Environment (HOME); Income Dynamics/Shocks; Parental Influences; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Social Capital; Time Use

Permission to reprint the abstract has not been received from the publisher.

Also presented at the SOLE and EALE joint meetings, University College London, June 2010

How well can parents insure their children's future? This paper aims at answering this question by studying the link between income shocks and parental investments in children in terms of time and goods. The paper presents three main contributions: (1) it estimates the degree of response to income shocks in families with young children, without imposing an a priori insurance setup; (2) it analyzes empirically the mechanism behind the degree of insurance found, in particular, the role of wealth and public transfers, and heterogeneity in responses to shocks by education and family structure; (3) finally, it proposes a useful way to use common information in the NLSY79 and the Consumer Expenditure Survey (CEX) and the American Time Use Survey (ATUS) to combine these three data sets and construct a panel of income, expenditures and time use. I use local business cycles as exogenous variation to families' resources. These are an unpredictable component of county unemployment rate, which I obtain after removing year and county effects from the time-series of county unemployment rate. I find that (1) families only partially insure against income shocks, but expenditures in education of children respond less to shocks than household consumption, as parents try to shield them against shocks because investments may be complements across children's life-cycle; (2) income elasticity of investments in terms of time is larger in families with young children than in families where there are only school-age children, because at early ages there is a larger substitutability between different uses of time; and (3) better off families use savings to buffer against shocks whereas poor families resort on public transfers.

Bibliography Citation
Ginja, Rita. "Income Shocks and Investments in Human Capital." Working Paper, University College London, London, England, January, 2010.