American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock
American Economic Review
vol. 114,
no. 9, September 2024
(pp. 2792–2824)
Abstract
Poor entrepreneurs must frequently choose between business investment and children's education. To examine this trade-off, we exploit experimental variation in short-run microenterprise growth among a sample of Indian households and track schooling and business out-comes over eleven years. Treated households, who experience higher initial microenterprise growth, are on average one-third more likely to send children to college. However, educational investment and schooling gains are concentrated among literate-parent households, whose enterprises eventually stagnate. In contrast, illiterate-parent households experience long-run business gains but declines in children's education. Our findings suggest that microenterprise growth has the potential to reduce relative intergenerational educational mobility.Citation
Agte, Patrick, Arielle Bernhardt, Erica Field, Rohini Pande, and Natalia Rigol. 2024. "Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock." American Economic Review, 114 (9): 2792–2824. DOI: 10.1257/aer.20220296Additional Materials
JEL Classification
- I21 Analysis of Education
- I26 Returns to Education
- I32 Measurement and Analysis of Poverty
- J13 Fertility; Family Planning; Child Care; Children; Youth
- L25 Firm Performance: Size, Diversification, and Scope
- L26 Entrepreneurship
- O12 Microeconomic Analyses of Economic Development