An Incentive Model of the Effect of Parental Income on Children

摘要: Economists explain the positive relationship between parental income and children’s outcomes using an investment model. Building on work in psychology sociology, this paper emphasizes importance of child‐rearing practices, which vary with income. I argue that parents’ ability to mold their behavior through pecuniary incentives is limited at low incomes, leading lower increased reliance nonpecuniary mechanisms such as corporal punishment. My model generates a especially incomes endogenously produces practices. Empirical confirms these implications.