Applied Seminar

Anastasia Terskaya

Universidad de Alicante


Seminar 1 – 14:30


We study whether parents’ investment decisions exacerbate or mitigate differences in their children’s genetic cognitive endowments. Parental investment decisions depend both on parental preferences regarding inequality in the distribution of their children’s quality and on how costly it is for parents to add to their children’s quality by investing in their human capital (or the price effect). Our empirical strategy allows us to isolate the effects of parental preferences regarding equality from the price effect, a distinction that cannot be made when relying on sibling or twin fixed effect models. Importantly, recent advances in molecular genetics allow us to use genetic variants that predict educational attainment as a measure of children’s cognitive endowments. These indicators are not only strong predictors of cognitive outcomes but they are also fixed at conception and hence cannot be affected by parental investment decisions. We also address the potential endogeneity of fertility in families with singleton siblings (i.e., parents sequentially decide whether to have more children depending on the endowments of previous children) by focusing on first-born children. This strategy is supported by the fact that, conditional on having a second child, the allocation of genotypes across siblings is as good as random. We find evidence that parents of singleton siblings display inequality aversion and, for a given level of absolute cognitive endowment of one child, they invest more in him/her if his/her sibling is better-endowed. Parents of twins instead display neutral preferences regarding equality, perhaps because it is harder for them to invest differently across their children.

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