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The response of household parental investment to child endowments

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Abstract

The theoretical and empirical literature on parental investment focuses on whether child-specific parental investments reinforce or compensate for a child’s initial endowments. However, many parental investments, such as neighborhood quality and family size and structure, are shared wholly or in part among all children in a household. The empirical results of this paper imply that such household parental investments compensate for low endowments, as proxied by low birth weight.

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Notes

  1. While the causes of low birth weight are not well understood, it is widely assumed in the empirical literature that genetic endowments and other exogenous prenatal influences, some of which are shared in common across siblings and some of which are specific to particular children, have some effect on birth weight (e.g., Almond et al. 2005).

  2. As we explain later, classical measurement error biases our test in favor of finding evidence for reinforcing household parental investment, whereas non-classical measurement error biases our test in favor of finding evidence for compensating household parental investment.

  3. Equation 3 assumes birth weight is measured without error. We consider the implications of measurement error in Sect. 4.

  4. In a sample of non-twin siblings from the Panel Survey of Income Dynamics (PSID), Conley and Bennett (2000) also report finding that OLS estimates of the impact of birth weight on high school graduation are half the size of comparable sibling fixed-effect estimates.

  5. A number of other studies have argued that that the estimated effect of early indicators of health (like height in the context of developing countries) on schooling are biased downward in magnitude for this reason as well (Alderman et al. 2001; Glewwe and King 2001).

  6. There is some question whether AFQT measures schooling achievement rather than ability, especially for minority children (see, for example, Cascio and Lewis 2005; Hansen et al. 2004). Either way, we will treat AFQT as a measure of common endowments in this paper.

  7. McCormick and Brooks-Gunn (1999) find that birth weight recall was especially accurate (98% reporting within 100 g) for mothers with children of more than 2,500 g. Our evidence for compensating household parental investment is strongest in families with children of above average birth weight. See also Seidman et al. (1987) and Gayle et al. (1988) for evidence on the accuracy of birth weight recall. Seidman et al. (1987) note that accuracy diminishes as the recall period increases. In the NLSY-C, the average recall period is 38 months. Our qualitative conclusions are unaffected when we restrict our sample to women with relatively short recall periods (within two years of birth).

  8. In the overall NLSY-C sample, the PPVT was administered to children ages 3–5 and 10–11.

  9. In all three of these tests, the entry point to the exam is determined by the child’s age. See CHRR (2002) for more about these tests.

  10. We do not examine MSD scores for three-year olds because MSD scores generally top-out by the third birthday leaving little variation across children (CHRR 2002).

  11. Our regression specifications allow for arbitrary correlation in errors at the mother level.

  12. The PIAT sample restrictions result in a sample with similar observable characteristics as the entire sample of NLSY-C siblings who are not in the poor white or military subsamples. As noted later in this section, the MSD and PPVT samples are generally of higher SES than the overall sample of siblings.

  13. Please refer to our working paper, Loughran et al. (2008), with the same title for full regression results for all four models.

  14. Note that even if we obtained estimates of β derived from within-MZ twin comparisons, the difference between β estimated from low and high birth-weight samples could be attributable to differences in the causal impact of birth weight on test scores, the failure to control for child-specific parental investments, or differences in the degree to which household parental investment compensates for low birth weight.

  15. See, for example, Neal and Johnson (1996).

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Acknowledgements

The authors gratefully acknowledge financial support from the National Institute of Child Health and Human Development under Grant No. R01HD37145.

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  1. RAND Corporation, 1776 Main St., Santa Monica, CA, 90407, USA

    David S. Loughran, Ashlesha Datar & M. Rebecca Kilburn

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  1. David S. Loughran
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Correspondence to David S. Loughran.

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Loughran, D.S., Datar, A. & Kilburn, M.R. The response of household parental investment to child endowments. Rev Econ Household 6, 223–242 (2008). https://doi.org/10.1007/s11150-008-9035-4

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