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Intergeneration Human Capital Transmission and Poverty Traps

Author

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  • Carmen Camacho

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Fernanda Estevan

    (EESP - Sao Paulo School of Economics - FGV - Fundacao Getulio Vargas [Rio de Janeiro])

Abstract
We use an overlapping generations model to investigate the role of parental health investment and children's schooling on the aggregate level of human capital and inequality. In our model, parental longevity affects children's human capital since it impacts human capital transmission. When poor parents cannot afford to invest in health, poverty traps may arise as human capital levels remain low in the long run. Both health costs and public school quality are crucial in determining whether households fall into the poverty trap. We demonstrate that high-quality schools ensure that successive generations become more educated, eventually attaining a higher human capital steady state. However, public health investments are particularly effective, as they affect household income and schooling and allow for human capital transmission through generations. We calibrate our model for Brazil and Chile and show that our model predicts that a poverty trap will arise in Brazil but not in Chile.

Suggested Citation

  • Carmen Camacho & Fernanda Estevan, 2023. "Intergeneration Human Capital Transmission and Poverty Traps," Working Papers halshs-04075431, HAL.
    • Handle: RePEc:hal:wpaper:halshs-04075431
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04075431
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    References listed on IDEAS

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    Keywords

    Poverty trap; Human capital; School quality; Intergenerational transmission; Longevity;
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