American Economic Review Vol. 114 No. 9 2024
Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock
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 children's education and business outcomes over eleven years. Treated households, who experience higher initial microenterprise growth, invest more in education and are one-third more likely to send children to college. However, only literate households experience child schooling gains and their enterprises stagnate in the long-run. In contrast, illiterate treatment 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.
- DOI
- 10.1257/aer.20220296
- Volume
- 114
- Issue
- 9
- Pages
- 2792-2824
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref