Research
- Dissertation Abstract: Essays on saving for child’s college [PDF]
- Asset accumulation and learning: theory and evidence from saving for child’s college, [PDF] job market paper
This paper develops a dynamic model combining asset accumulation and learning to explain the parents’ forward-looking saving behavior when they are confronted with a real option of college choice due to uncertainty of child’s ability. I construct a finite-horizon saving model with saving decision depending on asset level and belief on child’s ability. This paper is the first attempt to incorporate learning into search with saving model with an application on saving for college. The model infers, given enough time of learning, information can improve parents’ welfare by bettering off the consumption smoothing to accommodate the affordability of college cost in terms of both wealth and child’s true ability.
I test the implications of the model from Panel Study of Income Dynamics/Child Development Supplement & Transition into Adulthood (PSID/CDS & TA) (1997-2005) containing household asset holding, college-bound choice and child’s cognitive test scores by dynamic panel analysis. This empirical study investigates college saving behavior when learning is present. The estimated holding of college saving is around $1,200 during 1997-2005 for a family with average child and zero total net wealth in the sample. Data suggest pessimistic and/or rich parents reduce the college saving, which confirms the interaction of wealth and learning effect predicted by this model. The result also supports the state dependence of parent’s college expectation and diminishing persistence over time due to learning. I numerically explore the influence of learning on the parents’ welfare regarding consumption smoothing and college participation, which provides the justification on the inefficiency of education saving accounts (ESA). A number of fiscal policy improvements on ESA are proposed to encourage learning of child’s ability.
Keyword: Education saving, search, intertemporal consumption, learning, real option, dynamic panel data, taxation efficiency
- Education saving incentive and education saving accounts: evidence from SCF data, [PDF] manuscript (2007)
I analyze the effects of education saving accounts on education saving incentives over different income groups by using Survey of Consumer Finance (1989-2004). To control the unobservable heterogeneity and endogeneity, a synthetic panel of six age-cohorts is established to remove the group and time fix effects. I also specify the time trend to control the income dynamics through years. The model is estimated by both logit regression without lagged dependent variable and GMM estimator with lagged dependent variable. This is the first examination on the relationship between education saving account and education saving incentive and also the first to apply panel data techniques on ESA topics. The results are consistent with other ESA literatures, which suggests that education saving accounts are just alternatives to IRA to capture the motives of retirement saving and become tax shelters for rich households.
Keyword: Education saving account, education saving incentive, tax-favored vehicles, dynamic panel data
- Educational attainment in successive generations using a copula approach, [PDF] manuscript (2005)
This paper uses copula functions to obtain a flexible bivariate parametric model for discrete choice data on intergenerational educational attainment, by which we can estimate the joint distribution. The maximum likelihood estimation was mainly used. I apply a number of fitting criteria in selecting the copula family, which includes comparing log-likelihood in both parametric and alternative semi-parametric estimation and visualizing estimate difference across models. The robustness is confirmed by implementing the model on different sample size which is randomly selected. The copula approach provides convenience in hypothesis test on intergenerational mobility because only one (dependence) parameter is involved in forming the test statistic. This paper addresses the possible application of copula approach in several issues regarding intergenerational mobility on education attainment and beyond, such as income inequality.
Keyword: Copula, model selection, intergenerational mobility, joint distribution
