Belief Correction and Investment Contest: The Dual Mechanisms of Information Effects on Educational Investments
Luo Weidong1,2, Wang Qixuan1, Xu Bin3,4
1.School of Economics, Zhejiang University, Hangzhou 310058, China 2.Hangzhou City University, Hangzhou 310015, China 3.KRI-Modern Business Research Center, Zhejiang Gongshang University, Hangzhou 310018, China 4.School of Economics, Zhejiang Gongshang University, Hangzhou 310018, China
Abstract：The home Internet enables parents to better communicate with the schools and comprehend their children’s educational performance. Additionally, the home Internet enables parents to acquire outside educational information that may be contrasted with their children’s academic performance. Through two mechanisms, belief correction and investment contest, the educational information parents acquire through the home Internet will have an impact on their decisions regarding investments in their children’s education. On the one hand, the educational information made available by the Internet can help parents form more accurate beliefs in terms of their children’s abilities and make educational decisions that are better suited to their children’s needs; on the other hand, the Internet intensifies interpersonal comparisons, makes clear the rewards of competition in education, and so encourages all parents to increase their investments in their children’s education, resulting in investment contests.In this paper, we investigate whether the use of the home Internet will have an impact on parents’ investments in their children’s education and whether the acquisition of the home Internet affects educational investments through two mechanisms: belief correction and investment contest. We use PSM-DID estimates and an instrumental variable strategy to perform empirical researches on the population of middle school students using data from the China Education Panel Survey (CEPS). The parental investments in their children’s education, including whether or not their children take extracurricular tutoring classes, the cost of extracurricular tutoring classes in logarithmic form, and whether or not parents check on their children’s homework, are the explanatory variables for our empirical study. Whether the Internet has been installed in students’ homes is the explanatory variable of interest in this paper. We control the individual and family characteristics of students, the characteristics of the school where the students attend, school fixed effect and semester fixed effect, as well as city/county-semester fixed effect in various econometric models to varying degrees. We cluster standard errors at the city/county level.We find that parents of Internet-connected households invest more in their children’s education than parents of non-Internet-connected households. Even after taking possible selection biases into account using PSM-DID and instrumental variable estimates, the acquisition of the home Internet still has statistically significant effects on parents’ educational investments. We further explore the mechanisms through which the home Internet affects educational investments. We find that the acquisition of the home Internet does strengthen the connection between parents and schools, allowing parents to acquire more comparable information in terms of their children’s academic ranks. We also find that parents of high-ranking children frequently underestimate their children’s academic rankings, while parents of low-ranking children overestimate their children’s academic rankings. The acquisition of the home Internet has increased the beliefs of parents of high-ranking students in their children’s academic rankings, reduced the beliefs of parents of low-ranking students in their children’s academic rankings, and to some extent corrected the biases of parents’ initial beliefs, which reflects the belief correcting mechanism of educational information affecting educational investments. The acquisition of the home Internet also increases parents’ assurance that their children need to earn a bachelor’s degree or higher, reflecting the investment contest mechanism of educational information affecting educational investments.Our paper may contribute to the existing literature as follows. Firstly, previous empirical investigations have largely failed in identifying the numerous mechanisms through which educational information affects educational outcomes. We find two mechanisms through which the home Internet, as an information channel, affects Chinese family educational investments for the first time in a nationally representative sample of China: belief correction and the investment contest. Secondly, unlike researches that examine the overall impact of information provision on educational outcomes, and researches that simply examine the relationship between beliefs and educational decisions or the effects of information shocks on belief updating, we investigate the mechanisms through which information affects educational decisions, providing empirical evidence for the theoretical clue of information provision, belief updating, and decision adjustments.
罗卫东, 王启轩, 许彬. 信念纠偏与投资竞赛：信息影响教育投资的双重机制[J]. 浙江大学学报(人文社会科学版), 2024, 54(1): 42-60.
Luo Weidong, Wang Qixuan, Xu Bin. Belief Correction and Investment Contest: The Dual Mechanisms of Information Effects on Educational Investments. JOURNAL OF ZHEJIANG UNIVERSITY, 2024, 54(1): 42-60.
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