Lichand, Guilherme Bettinger, Eric Cunha, Nina Menezes Madeira, Ricardo
Year of Publication:
Working Paper No. 349
Do poor parents respond inefficiently to future returns on investments, even when they would have the financial means to invest optimally? Combining multiple experiments, we document that when parents of high-school students in Brazil are offered the opportunity to invest in an educational program, (1) prior experience with the program closes the gap in willingness to invest between high- and low-SES parents, but (2) financial worries reopen that gap. We show that financial worries lead parents to respond to small but immediate returns as if they were large, and to large but future returns as if they were small.