Parental Time , Family Income , and Child Outcomes

Parents make many decisions that involve a tradeoff between the amount of time and material resources they provide to their children. In this paper I examine to what degree additional family income can compensate for a decrease in parent-child time in terms of child outcomes. I use within-family variation in the amount of parental time and family income that children receive. Parents generally allocate resources equally among their children at each point in time but the amount of resources available to distribute changes over time. This leads the firstborn child to receive considerably more time inputs from his or her parents, especially when the children are spaced further apart. The second born receives a higher level of family income at each age and this difference is larger when the two children are spaced further apart or there is a larger increase in family income. These patterns indicate that if parental time inputs are important for child outcomes then the birth order differences will be larger in families in which the children are spaced further apart in age. If income at a point in time is important then the birth order gap will be offset in families that experience the largest rise in income. The longitudinal nature of the NSLY allows me to test for differences between siblings in various outcomes (both cognitive and behavioral) based on their birth order and spacing. As an extension, I also impute measures of parental time inputs from the American Time Use Survey onto the NSLY sample. Including both parental time inputs and family income in the same estimation allows me to calculate the rate of technical substitution between time and money in the production of child outcomes. This estimate will provide a benchmark by which to compare policies or practices that encourage parents to exchange their time for additional family income. * Author contact: [email protected] This version: May 2, 2007. This paper has benefited from helpful comments from Jessica Bean, Fran Blau, Lisa Dragoset, Ron Ehrenberg, Gary Fields, Baran Han, and Liz Peters.