Do Financial Incentives Aimed at Decreasing Interhousehold Inequality Increase Intrahousehold Inequality?

Abstract

Research has shown that giving disadvantaged families financial incentives to invest in their children could decrease socioeconomic inequality by enhancing human capital formation. Yet, within the household how are such gains achieved? We use a field experiment to investigate how parents allocate time when they receive financial incentives. We find that incentives increase investment in the target child. But, parents achieve these gains by substituting away from time spent with the child's sibling(s). An unintended consequence is that intrahousehold inequality increases and aggregate gains from the program are overstated when focusing only on target children.