January 25, 2022, Paper: "How do the investment choices of poor entrepreneurs impact their, and their children’s, economic well-being? To answer this, we exploit experimental variation in household income linked to a one-time relaxation in household liquidity constraints (Field et al., 2013). Treatment households increase educational investments and, eleven years after the intervention, their children are 34% more likely to attend college. Heterogeneity analysis shows that educational gains only accrue to children with literate parents. In contrast, long-term treatment gains among illiterate adult households accrue on the business margin and are accompanied by adverse educational consequences for their children. Specifically, treatment raises household income, but also school drop-out. We estimate positive lifetime earning gains from treatment for all children but treatment income gains for children of literate parents are fourfold larger than those for illiterate parents and this gap exceeds the comparable difference in control group. Our findings highlight household educational investment choices as an underlying driver of opportunity but also a conduit linking parental inequality with with lower intergenerational earning mobility."
Non-HKS Harvard Author Website - Natalia Rigol