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Money Can’t Buy Time

Household Choices and Child Development
Copyright: Tuned_In

Recent studies have argued that children’s cognitive and non-cognitive outcomes are largely determined early in life. In this context, inputs supplied by families and others outside the household during early childhood would play a very significant role in later cognitive, social and behavioural outcomes. In turn, the growth in labour market participation among women with young children has raised concerns about its implications for child cognitive development. In this analysis, Daniela del Boca, Christopher Flinn and Matthew Wiswall explore the impact of changes in the time availability of mothers and fathers on the child development process.


The authors use data from the Panel Study of Income Dynamics (PSID) and the first two waves of the Child Development Supplement (CDS-I and CDS-II). The PSID is a longitudinal study that began in 1968 with a nationally representative sample of about 5,000 American families. The 1997 CDS-I sample size is approximately 3,500 children residing in 2,400 households. A follow-up study with these children and families was conducted in 2002–03 (CDS-II) when the children were between the ages of 8–18. Children’s cognitive skills are defined broadly and include literacy, language and problem-solving skills.


 


Time invested in parenting matters


The main message of the study is that time and financial investments in children can only be properly understood when household preferences, production technologies and choice sets are simultaneously considered. Taking all these elements into account, results indicate that time inputs by both parents are important for the cognitive development of their children, particularly when the child is young. The time parents spend actively or passively engaged with their children has an effect on cognitive development that decreases with the child’s age, particularly in the case of mothers. The authors highlight that the importance of the time fathers spend with children for cognitive development has not been emphasised enough in most previous research.

In turn, although financial expenditures on the child have an impact on cognitive development that increases with the child’s age, their impact at any age is modest at best (at least those made by the household). This would be the case even if all of the transfers families receive were spent on the child. The small impact is due to the relatively low impact of financial investments on child outcomes in general, and the fact that a significant fraction of transfer money is spent on other household consumption costs and the leisure of the parents. Regarding timing, the largest impacts were found when the transfer is received towards the end of the child’s development process. However, this analysis suggests that the productivity of financial investments in children via the household have limited impact on their cognitive abilities at any stage of their development.


 


Money is overrated


Another important contribution of this research is its capacity to trace the connections between the level of household income and child development. A higher level of family income does not necessarily indicate a higher level of family resources being devoted to children. This is due to the fact that, for most households, income is primarily generated by labour market earnings, and these require substantial time commitments from parents. Given that parental time investments are crucial factors in producing good cognitive outcomes in children, higher income often means a decrease in the time devoted to the children. This connection may dampen or even reverse the assumed positive relationship between income and child development.


The authors also estimated a two-child household set of models, in which many more types of time investment patterns are considered and the cognitive quality levels of two children instead of one are measured. Still they found similar patterns in the one and two-child household cases. An interesting result from the two-child analysis is that there is no significant relation between birth order and final cognitive ability levels between the siblings.


 


The impact for policy designs


Transfers from the government, as well as tax breaks, have the objective to increase the welfare of children, and their cognitive ability is an important contributor to life chances and success.

Motivated by some of the recent work of Cunha and Heckman (2008), in which it is argued that child investments in early years of life are more productive than those made in later years, this study looks at the efficacy of monetary transfers to the household at different stages of the development process. Results indicate that the most successful transfer scheme concerning the child’s cognitive skills is when transfers are concentrated at the later stage of the development process.


In addition, changes in the non-labour income of the household have limited impacts on the cognitive ability of the child. Instead of generating complex substitution schemes, policy makers might consider shifting their focus to mechanisms enabling both parents to spend time with their offspring.


 



*This PopDigest has received funding from the European Union's Seventh Framework Programme (FP7/2007-2013) under grant agreement n° 320116  for the research project FamiliesAndSocieties.

FamiliesAndSocieties 
(www.familiesandsocieties.eu) has the aim to investigate the diversity of family forms, relationships and life courses in Europe, to assess the compatibility of existing policies with these changes, and to contribute to evidence-based policy-making. The consortium brings together 25 leading universities and research institutes in 15 European countries and three transnational civil society organizations.

Author(s) of the original publication: 
Writer: 
Daniela Vono de Vilhena / Sigrun Matthiesen