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  • Xiaoyan Youderian (a1)

This paper considers parental time investment in early childhood as an education input and investigates its relationships with other inputs in their contribution to human capital. I develop a 12-period overlapping generations model where human capital formation is a multistage process. The model is calibrated to the US economy so that the generated data matches patterns in parental education spending and child care time. The estimation results show that time input is complementary to education expenditure. I apply the model by implementing three early education policies. The first two involve more government spending and the third is paid parental leave. The policy experiments show that adopting paid parental leave is the most costly means of increasing human capital. An education subsidy is more effective than a direct increase in government spending at promoting human capital; however, its impact on earnings inequality and persistence is smaller.

Corresponding author
Address correspondence to: Xiaoyan Youderian, Department of Economics, 327 Smith Hall, Xavier University, Cincinnati, OH 45207, USA; e-mail:
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I am indebted to two anonymous referees, and the coordinating associate editor for valuable comments. I thank participants in the 2012 Midwest Macro Group meeting at University of Colorado Boulder, seminar attendants at Shanghai University of Finance and Economics and Southwestern University of Finance and Economics, China in 2015, and workshop attendants at Xavier University in 2016 for helpful comments. I also thank William Blankenau for valuable advice. All errors are mine.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
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