Education savings accounts, parent contributions, and education attainment

Abstract

This chapter uses a dynamic structural model of household choices on savings, consumption, fertility, and education spending to perform policy experiments examining the impact of tax-free education savings accounts on parental contributions toward education and the resulting increase in the education attainment of children. The model is estimated via maximum simulated likelihood using data from the National Longitudinal Survey of Young Women. Unlike many similarly estimated dynamic choice models, the estimation procedure incorporates a continuous variable probability distribution function. The results indicate that the accounts increase the amount of parental support, the percent contributing and education attainment. The policy impact compares favorably to the impact of other policies such as universal grants and general tax credits, for which the model gives results in line with those from other investigations.

Citation

Morris, M.D.S. (2010), "Education savings accounts, parent contributions, and education attainment", Greene, W. and Carter Hill, R. (Ed.) Maximum Simulated Likelihood Methods and Applications (Advances in Econometrics, Vol. 26), Emerald Group Publishing Limited, Leeds, pp. 165-198. https://doi.org/10.1108/S0731-9053(2010)0000026010