Scandinavian Working Papers in Economics
Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics
No 10/2024: Insurance against Income Shocks, Parental Investments, and Child Development
Pedro Carneiro (), Kjell Gunnar Salvanes () and Emma Tominey ()
Additional contact information
Pedro Carneiro: Dept. of Economics, University College London, Postal: UCL, Department of Economics, Drayton House, 30 Gordon Street, London WC1H 0AN, United Kingdom
Kjell Gunnar Salvanes: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Emma Tominey: Dept. of Economics and Related Studies, University of York, Postal: University of York, Department of Economics and Related Studies, Alcuin College Block D, Alcuin Way, Heslington, York YO10 5DD, United Kingdom
Abstract: Faced with income shocks, households may be unable to smooth their consumption, because of limited insurance possibilities. Likewise, it may also be difficult to smooth investments in children. This could have large consequences for their human capital if there are sensitive periods of learning, or if investments are not perfect substitutes over time. In this paper we estimate the impact of transitory and permanent shocks to household income in different periods of childhood on the human capital of their children, using administrative records from Norway. Across outcomes, the impacts of transitory and permanent shocks are largely similar regardless of the age at which they occur, with a few exceptions (small in magnitude). The impact of transitory shocks is larger for college enrolment and obesity if these shocks occur at earlier ages. The impacts of permanent shocks on high school graduation are larger the later in childhood they occur.
Keywords: Child human capital; insurance; income dynamics
Language: English
76 pages, June 10, 2024
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