Parental education and investment in children's human capital in rural China

Using a survey of children and their families, teachers, and school and village leaders in 100 rural villages in Gansu province, China, an attempt was made to examine how parental education affects educational investments in children, focusing on investments in goods and time. More complete measures of educational investments than those used elsewhere in the literature were captured. Aspects of teacher quality were determined via a comprehensive teacher ranking. Furthermore, the relatively large number of villages allowed for village fixed effects to control for school quality, local socioeconomic conditions, labor market opportunities, and other forms of unobserved heterogeneity at the local level. Finally, a child cognitive development measure allowed to control for innate ability and expected returns to child education, a key omitted variable in most studies. It was found that more educated parents allocate higher levels of both goods and time on their children's human capital production. Furthermore, more educated parent expect higher returns to education for their children. The effect of mother's and father's education differed, with a marginal year of mother's education having a larger impact on time investments than a marginal year of father's education.