The estimated discount rate of parents is used to test a choice-based intergenerational model of the contribution of environment to the cognitive skills of a child of a given endowment. A lower parental discount rate is shown to imply higher cognitive skills of the young child. In the context of the model, estimates also imply that environmental conditions and human capital formation are not separable. Lesser environmental quality raises the costs of human capital formation in children and lesser human capital reduces parents' demand for environmental quality. Environmental quality differences among families, just like genetic differences, may persist across generations.
All Science Journal Classification (ASJC) codes
- Applied Psychology
- Sociology and Political Science
- Economics and Econometrics