We exploit the exogenous variation generated by a university reform to investigate whether and to what extent non-durable consumption responds to changes in children's years of schooling. On average, one more year of education increases household non-durable consumption by 0:15 log points. Our ndings are consistent with the view that education is costly, entering on net negatively into the household life-time utility function in an additive separable way. Noteworthy, education is a production rather than a normal consumption good producing mainly potential life-time income gains in terms of both higher income and lower probability of negative income shocks. Through this mechanism, an exogenous shock in the ospring's years of schooling raises overall non-durable consumption instead of exclusively affecting the composition of the consumption bundle. This implies that a reform of the education system which achieves its goal, affects positively not only the individuals' human capital accumulation process but also, unintendedly, non-durable consumption.

Do households consume more when they invest in education?

AINA, CARMEN;SONEDDA, Daniela
2017-01-01

Abstract

We exploit the exogenous variation generated by a university reform to investigate whether and to what extent non-durable consumption responds to changes in children's years of schooling. On average, one more year of education increases household non-durable consumption by 0:15 log points. Our ndings are consistent with the view that education is costly, entering on net negatively into the household life-time utility function in an additive separable way. Noteworthy, education is a production rather than a normal consumption good producing mainly potential life-time income gains in terms of both higher income and lower probability of negative income shocks. Through this mechanism, an exogenous shock in the ospring's years of schooling raises overall non-durable consumption instead of exclusively affecting the composition of the consumption bundle. This implies that a reform of the education system which achieves its goal, affects positively not only the individuals' human capital accumulation process but also, unintendedly, non-durable consumption.
2017
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11579/86801
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