An Indirect Test of Children's Influence on Efficiencies in Parental Consumer Behavior

An Indirect Test of Children's Influence on Efficiencies in Parental Consumer Behavior The parent-child relationship has generated a considerable amount of research in a variety of disciplines. Interestingly, despite differences in jargon, methodology, and focus, the sociological, psychological, educational, and economic literatures all proceed from the virtually sacrosanct assumption that it is parents who act as influencers and children as the influenced. Within the last decade or so, serious questioning of the validity of this assumption has begun. The most extensive body of results that refutes the parent/child dichotomy of agent/object can be found in the applied behavioral sciences. Psychologists such as Bell (1968, 1971), Harper (1971, 1975), and Yarrow (1971) have shown the literature to be open to reinterpretation and have demonstrated experimentally that, even at the seemingly helpless infant level, the child is capable of modifying the behavior of parents. If a child can influence the parent-child interaction at as early a developmental stage as Bell shows, then it would seem even more plausible that a child's progressive exposure to formal schooling can affect parental behavior considerably as the child grows up. In fact, it is well known that children can influence household consumption (e.g., Prais and Houthakker 1971; Lazear and Michael 1980; Becker 1981), but as yet no one seems to have shown this influence to be positive, leading to greater household efficiency. This paper illustrates a positive benefit of children that enhances the efficiency with which parents consume. It is argued that parents receive economic benefits from children in the form of reverse intergenerational transfers. These occur because of a positive influence children have on family behavior. The hypothesis is that children, possibly through what they learn in school, cause their parents to become more efficient consumers. The research is important because it tests for a benefit children have on consumer behavior that is currently ignored in the literature. Further, not accounting for such benefits could cause an underestimate in measures such as the rate of return to education or the benefits of such government programs as Head Start. The hypothesis is motivated by Whyte (1957, p. 433), who suggests that schools to which parents send their children "can also help educate parents," Yet more than 30 years later, no systematic investigation of Whyte's original assertion exists, despite the evidence just cited in the developmental psychology literature, which demonstrates experimentally that children are capable of modifying parental behavior. The next section develops the reverse intergenerational transfer hypothesis by outlining current theory regarding the acquisition of human capital so that the reverse intergenerational transfer (RIT) hypothesis can be introduced as a modification. In the following section an empirical methodology is presented. Results are presented and discussed in the next two sections, followed by the conclusion. DEVELOPMENT OF THE RIT HYPOTHESIS Human capital theory takes as its basic proposition that "people enhance their capabilities as producers and as consumers by investing in themselves" (Schultz 1962, p. 1). Education is considered a prime example, although investments in health, information, and on-the-job training are all considered human capital as well. The rates of return to these investments (ROR) are measured by the percent increase in income resulting from an incremental amount of investment. For schooling this is the percent increase in earnings attributable to an additional year of schooling (see Figure 1). Michael (1972, 1973), concentrating on education, added another dimension to the human capital model by showing that an increase in market earnings is but one aspect of the returns to the investment and that nonmarket benefits accrue as well. …