Income Inequality and Class Divides in Parental Investments Daniel Schneider UC Berkeley Department of Sociology Orestes P. Hastings UC Berkeley Department of Sociology Joe LaBriola UC Berkeley Department of Sociology∗ ∗Daniel Schneider (Corresponding author): UC Berkeley, Department of Sociology, 480 Barrows Hall, Berkeley, CA 94720;
[email protected]. The authors thank the Institute for Research on Labor and Employment (IRLE) at UC Berkeley and the Russell Sage Foundation for research support. Income Inequality and Class Divides in Parental Investments Abstract Historic increases in income inequality have coincided with widening class divides in parental investments of money and time in children. These widening class gaps are significant because parental investment is one pathway by which advantage is transmitted across generations. But, is the apparent association with income inequality coincident or causal? Using over three decades of micro-data from the Consumer Expenditure Survey and American Heritage Time Use Survey linked to state-year measures of income inequality, we test the effects of inequality on class gaps in parental investment. We find that rising income inequality increased class gaps in parental expenditures on investment in children, but did not affect class gaps in childcare time. We further explore mechanisms that may drive the relationship between rising income inequality and widening class gaps in parental expenditures on investment in children. This relationship is partially explained by the increasing concentration of income at the top of the income distribu- tion in times of higher inequality, which gives higher-earning households more money to spend on parental investment. In addition, we find evidence that rising income inequality reshaped parental preferences towards investment in children differentially by class.