A02: Family decision-making and investments

The family is an important entity of economic decision-making regarding investments in human capital, health, and care for children, with significant impact on choices made as adults.

In the first part of our project, we focus on familial decisions to invest in children. These human capital investments are multi-faceted and encompass parental effort, schooling choices, and formal education. Early-life investments in skills, traits, and education impact decisions made later in life, including decisions to invest in health. Indeed, our findings from the first funding period illustrate the importance of familial resources and human capital investments, not only for educational outcomes, but also for health outcomes. Motivated by these findings, in the second part of our project we examine investments in health made by adults in the community, thus broadening the reference group from the family to the local community. This is a timely addition to our research agenda given the renewed emphasis placed on health knowledge and investments in the current pandemic. In particular, we study the role of health education (either directly gained through increased health literacy or indirectly gained through policy) for health outcomes.

A first adjustment of our agenda relative to the first funding period is a stronger emphasis on the effects of parental beliefs and preferences on investments in schooling. Second, we address the role of relative performance (among siblings or cohorts) for parental investments, sorting behaviors and preference formation. Third, we devote more time to the issue of health education, shifting focus toward human capital investments made by (young) adults and their health outcomes. Fourth, we turn to the motivations driving direct health investments of (young) adults via lifestyle behavioral choices—such as engaging in exercise, smoking, drinking, or consuming illicit products—and their implications for long-run health outcomes. Finally, we expand on the static, cross-sectional work from the first funding period to take a
dynamic view on the formation of preferences and well-being.