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Early childhood education expenditures and the intergenerational persistence of income

Author

Listed:
  • William Blankenau

    (Kansas State University)

  • Xiaoyan Youderian

    (Xavier University)

Abstract
We consider the extent to which cross-country differences in the intergenerational persistence of income can be explained by differences in government spending on early childhood education. We build a life-cycle model where human capital is accumulated in early, middle and late childhood. Both families and the government can increase the human capital of young agents by investing in education at each stage of childhood. Ability in each dynasty and wages per unit of human capital are stochastic. Different realizations of these values and the resultant education spending histories generate a stochastic steady-state distribution of income. Government spending can reduce persistence by weakening the link between parental income and education spending for a child. Our results show that doubling early childhood spending in the U.S. to match levels in Norway and Denmark eliminates less than 9 percent of the gap in intergenerational income persistence. Increased government education spending in later childhood has almost no effect on persistence. Early childhood expenditures can have a larger effect when allocated to low income families. (Copyright: Elsevier)

Suggested Citation

  • William Blankenau & Xiaoyan Youderian, 2015. "Early childhood education expenditures and the intergenerational persistence of income," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 334-349, April.
    • Handle: RePEc:red:issued:12-190
    DOI: 10.1016/j.red.2014.06.001
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    3. Delalibera, Bruno Ricardo & Ferreira, Pedro Cavalcanti, 2019. "Early childhood education and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 98(C), pages 82-104.
    4. Christopher Rauh, 2015. "The Political Economy of Early and College Education - Can Voting Bend the Great Gatsby Curve?," 2015 Meeting Papers 82, Society for Economic Dynamics.
    5. Youngsoo Jang & Minchul Yum, 2024. "Aggregate and Intergenerational Implications of School Closures: A Quantitative Assessment," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(3), pages 90-130, July.
    6. Vera Tolstova, 2021. "Marital Sorting and Cross-Country Differences in Intergenerational Earnings Persistence," CERGE-EI Working Papers wp680, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    7. Luiz Brotherhood & Bernard Herskovic & João Ramos, 2023. "Income-Based Affirmative Action in College Admissions," The Economic Journal, Royal Economic Society, vol. 133(653), pages 1810-1845.
    8. Christopher Herrington, 2015. "Public Education Financing, Earnings Inequality, and Intergenerational Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 822-842, October.
    9. Magalhães, Graziella & Turchick, David, 2022. "Growth and inequality under different hierarchical education regimes," Economic Modelling, Elsevier, vol. 116(C).
    10. Shang, Rui, 2023. "Divide or dividend: How digital finance impacts educational equality," Finance Research Letters, Elsevier, vol. 55(PA).
    11. Ferreira, Pedro Cavalcanti & Delalibera, Bruno Ricardo, 2016. "Economic growth and complementarity between stages of human capital," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 779, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    12. Hellier, Joël, 2017. "Stratified higher education,social mobility at the top and efficiency: The case of the French ‘Grandes écoles’," MPRA Paper 76724, University Library of Munich, Germany.
    13. van der Weide, Roy & Lakner, Christoph & Mahler, Daniel Gerszon & Narayan, Ambar & Gupta, Rakesh, 2024. "Intergenerational mobility around the world: A new database," Journal of Development Economics, Elsevier, vol. 166(C).
    14. Brotherhood, Luiz & Delalibera, Bruno R., 2020. "Minding the gap between schools and universities," Journal of Economic Dynamics and Control, Elsevier, vol. 120(C).
    15. Roy van der Weide & Ambar Narayan, 2019. "China and the United States: Different economic models but similarly low levels of socioeconomic mobility," WIDER Working Paper Series wp-2019-121, World Institute for Development Economic Research (UNU-WIDER).
    16. Van Der Weide,Roy & Lakner,Christoph & Mahler,Daniel Gerszon & Narayan,Ambar & Nichanametla Ramasubbaiah,Rakesh Gupta, 2021. "Intergenerational Mobility around the World," Policy Research Working Paper Series 9707, The World Bank.
    17. Joao Ramos & Bernard Herskovic, 2017. "Promoting Educational Opportunities: Long-run Implications of Affirmative Action in College Admissions," 2017 Meeting Papers 1552, Society for Economic Dynamics.

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    More about this item

    Keywords

    Government education expenditures; Life-cycle model; Early childhood education; Intergenerational persistence of earnings;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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