Author(s)
Elizabeth Caucutt, Lance Lochner, Youngmin Park

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.

JEL Codes
J60: Mobility, Unemployment, and Vacancies: General
I00: Health, Education, and Welfare: General
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
Keywords
social mobility
achievement gap
family investments