Sooner or later? The impact of child education on household consumption

Abstract

We study the impact of one more year of child’s education on household (non-durable) consumption. We exploit an exogenous shock generated by a university reform in Italy in the early 2000s. We find that families responded in a way that is consistent with education as a production good. The higher child’s education produced household positive, permanent income innovations. Hence, family non-durable consumption increased. Our findings suggest that education can be an insurance device against adverse permanent income shocks. The 2001 reform not only positively affected offspring’s years of schooling, but it also had a positive effect to boost household consumption.