Parental Human Capital Investment Responses to Children’s Disability

One of the potential explanations for the well-documented school participation deficit associated with disabilities is that parents underinvest in the education of disabled children. Alternatively, inequality averse parents may reduce the education gap associated with disabilities. This paper proposes a simple theoretical framework and an estimation strategy aimed at investigating whether parental decisions to invest in the education of disabled children are driven by equality or efficiency. Even if parents are inequality averse, they may still choose to invest more in non-disabled children than in disabled children if education of disabled individuals is more costly than the education of non-disabled. This implies that comparisons of parental investments across siblings with different health conditions (such as the ones underlying sibling fixed effects models) do not necessary yield an unambiguous conclusion about parental inequality aversion. By means of a general preference model, I show that variation in family size and children’s disability can be used to infer whether parents are averse to inequality or if, instead, they care more about efficiency. In particular, I exploit the fact that parents of only children cannot possibly exhibit inequality aversion. I apply this identification strategy to Mexican cross-sectional data and find evidence that equality matters for parents, and that it does so more if they have sons than if they have daughters.