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Genigraphics® has been producing output from PowerPoint® longer than anyone in the industry; dating back to when we helped Microsoft® design the PowerPoint® software. US and Canada: [This sidebar area does not print.] Effect of liquidity Constraints on Children’s Non-cognitive skills in Vietnam Contact Selected References The empirical results using OLS and 2SLS tell us that the liquidity constraints have negative effect on child non-cognitive skikks when the child is in young age. This result is supported by other literatures emphasizing the importance of early intervention to enhance human capital accumulation (e.g. Curie et al. 1998, Cunha and Heckman 2012). The effect of liquidity constraints in earlier age to later test score does not have robust effect on child cognitive skills. The effect disappears when community fixed effect is controlled. The liquidity constraints have more effect on cognitive skills than non-cognitive skills (Hur 2014). Discussion Results No significant effect for older cohorts in Round 3 (14-15 years old). Liquidity constraints affect child non-cognitive skills when child is young. Early liquidity constraints negatively affects child test score when only the individual covariates are added Methodology Young Lives Data in Vietnam Non-cognitive skills: Self-esteem, self-efficacy, and aspiration Other covariates: gender, age, mother's education, father's education, household income, lives in rural area, and household size Liquidity Constraints measure Direct measures of liquidity constraints: this paper classifies a household as not liquidity constrained if it answers ``Yes'' to following question: “Would your household be able to raise 300,000 VND (in Round 3, for Round 2 the figure was 230,000 VND) in one week if you needed it? “ Data Introduction Parents' decision about child human capital investment depend on the liquidity constraints If households cannot insure their income against income shocks, parents smooth the consumption and child human capital investment decreases. If households can secure their income by borrowing in financial market, child human capital accumulation might not be affected by income shock. (Becker and Tomes, 1994). McLoyd (1998) discussed about the mediation when parents have economic difficulties. Few things are know about the non-cognitive skills Two challenges on the estimation of liquidity constraints effect: - indirect measure of liquidity constraints - potential bias due to the endogeneity of liquidity constraints - Non-cognitive skills data Contribution of this paper: Measure the liquidity constraints directly, address the endogeneity of liquidity constraints by using 2SLS. measure the effect of early liquidity constraints on later non-cognitive skiils This paper investigate the effect of liquidity constraints on children’s non-cognitive skills in Vietnam. To estimate precise effect, this paper measures the liquidity constraints directly and address endogeneity of liquidity constraints. The results tell us that liquidity constraints have more effect on non-cognitive skill of child in younger age. Abstract Yoon Sun HUR, Department of Applied Economics, University of Minnesota Yoon Sun Hur Department of Applied Economics University of Minnesota Four Sub Samples Round 2 (2006)Round 3 (2009) Younger Cohorts (born ) 1, yrs 1, yrs Older cohorts (born ) yrs yrs Theoretical Framework Optimal Life Cycle Investment model from Caucutt and Lochner (2012): Suppose Three time periods. During childhood that is period 1 and 2, the problem for parents is: Subject to the budget constraints: And the borrowing constraints: After FOCs and algebras: When there is liquidity constraints during early period, there is under-investment during the period. There is under-investment in at least one period or both if any liquidity constraints binds Table 1. Questions measuring Non-cognitive skills The 2SLS results tell us that liquidity constraints lowers younger cohors self-esteem by 23 times of a standard deviation and CDA test score by 4 times of a standard deviation in Round 2. The effect is smaller and non significant for older cohorts. Instrumental variables have mixed effect on liquidity constraints. The value of remittance does not seem to have any effect on household's liquidity constraints. The existence of relatives in the communiy doe not significantly affect household's liquidity status. The existence of other subsidized liquidity program in the community has positive effect on household's liquidity constraints. Table 2. Effect of current liquidity constraints using 2SLS Attanasio, O., and K. Kaufmann “Educational Choices, Subjective Expectations, and liquidity Constraints.” Working paper No.15087, National Bureau of Economic Research. Becker, G.S., and N. Tomes “Human Capital and the Rise and Fall of Families.” In Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3 rd Edition). The University of Chicago Press. Pp Carneiro, P., and J.J. Heckman “The Evidence on liquidity Constraints in Post-Secondary Schooling.” The Economic Journal 112: Caucutt, E.M. and L. Lochner “Early and Late Human Capital Investments, Borrowing Constraints, and the Family.”, Working paper No , National Bureau of Economic Research. Cunha, F., and J.J. Heckman “Investing in our Young People.” Working paper No National Bureau of Economic Research. Cunha, F., J.J. Heckman, L. Lochne, and D.V.Masterov “Interpreting the Evidence on Lice Cycle Skill Formation.”, Handbook of the Economics of Education 1: Glewwe. P “Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes.” Journal of Economic Literature 40: Hanushek, E.A “Measuring Investment in Education.” The Journal of Economic Perspectives 10:9-30 Hanushek, E.A., and L. Woessmann “The Role of Cognitive Skills in Economic Development.” Journal of Economic Literature, pp Jacoby, H.G., and E. Skoufias “Risk, Financial Markets, and Human Capital in a Developing Country.” The Review of Economic Studies 64: Stinebrickner, R., and T. Stinebrickner “The Effect of liquidity Constraints on the College Drop-out Decision: A Direct Approach Using a New Panel Study.” The American Economic Review 98: