Environmental Incentives and Parental Investments

Abstract

Worsening economic conditions can incentivize parental investments by raising the perceived significance of human capital accumulation in ensuring later-life success. Using a large representative German survey, in a regional- and time-fixed effects setting, I estimate the causal impact of the local unemployment rate on parental investment measures. I find that a rise in the unemployment rate increases measures of maternal support, academic interest, and homework assistance. However, this general positive effect does not hold true for parents of all socioeconomic backgrounds. Heterogeneity analysis suggests that low educated parents in fact decrease investments in response to rising unemployment rates.