Abstract

This study reviews the literature on socio-economic inequality in investments in children. The evidence is consistent with a model in which parents are subjectively rational, but although parents act to maximize a well-defined objective function, they may not have up-to-date information on how to invest in their children. The informational constraints have implications for the types of policies that can be adopted in order to reduce the investment gap in children. Preliminary evidence from small randomized controlled trials is suggestive of promising programs that can substantially improve parental investments and child welfare. The findings provide useful guidance for the design of new policies that can close the human capital gap that opens up long before children reach school.