TY - JOUR

T1 - Beliefs, parental investments, and intergenerational persistence: A formal model

AU - Hjorth-trolle, Anders

PY - 2018

Y1 - 2018

N2 - Empirical research documents persistent socioeconomic and race gaps in parental investments in children. This article presents a formal model that describes the process through which parents’ beliefs about the returns on investments in children evolve over time in light of new information that they receive regarding the outcomes of past investments. The model, which is based on Bayesian learning, accounts for how parents of low socioeconomic status may come to underinvest in their children because they have false low beliefs about the returns on investments. Moreover, the model describes how beliefs are transmitted across generations, thus creating dynasties of underinvesting parents who reproduce inequalities in children’s socioeconomic outcomes. Finally, this article uses National Longitudinal Survey of Youth data to provide illustrative empirical evidence on key aspects of the proposed model. The main contribution of this article is to integrate parents’ beliefs about returns on investments into existing models of intergenerational transmissions.

AB - Empirical research documents persistent socioeconomic and race gaps in parental investments in children. This article presents a formal model that describes the process through which parents’ beliefs about the returns on investments in children evolve over time in light of new information that they receive regarding the outcomes of past investments. The model, which is based on Bayesian learning, accounts for how parents of low socioeconomic status may come to underinvest in their children because they have false low beliefs about the returns on investments. Moreover, the model describes how beliefs are transmitted across generations, thus creating dynasties of underinvesting parents who reproduce inequalities in children’s socioeconomic outcomes. Finally, this article uses National Longitudinal Survey of Youth data to provide illustrative empirical evidence on key aspects of the proposed model. The main contribution of this article is to integrate parents’ beliefs about returns on investments into existing models of intergenerational transmissions.

KW - Faculty of Social Sciences

KW - Beliefs

KW - formal modeling

KW - intergenerational transmission of resources

KW - parental investments

KW - rational choice theory

KW - utility function

U2 - 10.1177/1043463117754076

DO - 10.1177/1043463117754076

M3 - Journal article

VL - 30

SP - 108

EP - 154

JO - Rationality and Society

JF - Rationality and Society

SN - 1043-4631

IS - 1

ER -