Sooner or later? The impact of child education on household consumption

We study the impact of one more year of child's education on household (non-durable) consumption. We exploit an exogenous shock generated by a university reform in Italy in the early 2000s. We find that families responded in a way that is consistent with education as a production good. The higher child's education produced household positive, permanent income innovations. Hence, family non-durable consumption increased. Our findings suggest that education can be an insurance device against adverse permanent income shocks. The 2001 reform not only positively affected offspring's years of schooling, but it also had a positive effect to boost household consumption.

Automated summary

This study examines the impact of an additional year of child's education on household consumption. The findings indicate that education serves as a production good, generating positive and permanent income innovations, which in turn leads to an increase in family non-durable consumption. The study suggests that education can serve as an insurance device against adverse permanent income shocks.