Child skill production: Accounting for parental and market-based time and goods investments by Lance Lochner

Join us for the latest Applied Economics Research Seminar Series event, Summer Term 2025.

Lance Lochner, from the Department of Economics at the University of Western Ontario, will present this week's seminar on Child skill production: Accounting for parental and market-based time and goods investments.

Abstract

Families invest parental time, home goods/services, and market-based child care in their children. We study these investments, focusing on two issues: the role of parental human capital and the substitutability of inputs in the skill production process. We develop a relative demand estimation strategy that uses intratemporal optimality to estimate the substitutability and relative productivity of different inputs. This approach assumes that families are knowledgeable about these features of the skill production technology, but it does not require data on skills and easily addresses measurement error in inputs. We show how relative demand restrictions can simplify and improve estimation of the dynamics of skill production when incorporating panel data on skill measures. Combining data on relative demand and skill dynamics further allows researchers to test whether beliefs about skill production align with the true technology. Using data from the Child Development Supplement of the PSID, we estimate the skill production technology for American children ages 5–12, finding moderately strong complementarity between inputs. We estimate little effect of parental education on the child production technology: more-educated parents invest more primarily because they have higher incomes and stronger preferences for children’s skills. Counterfactual simulations show that the degree of input complementarity we estimate has important implications for policies that subsidize specific inputs or provide free child care.

The seminar will begin with a presentation and will end with a Q and A session.

It will be held in the Economics Common Room at 2pm on Wednesday, 30 April 2025. This event is open to all levels of study and is also open to the public. To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Applied Economics Research Seminar Series.