Household environmental protection and the intergenerational transmission of human capital

The estimated discount rate of parents is used to test a choice-based intergenerational model of the contribution of environment to the cognitive skills of a child of a given endowment. A lower parental discount rate is shown to imply higher cognitive skills of the young child. In the context of the model, estimates also imply that environmental conditions and human capital formation are not separable. Lesser environmental quality raises the costs of human capital formation in children and lesser human capital reduces parents' demand for environmental quality. Environmental quality di€erences among families, just like genetic di€erences, may persist across generations. Ó 2000 Published by Elsevier Science B.V. All rights reserved. JEL classi®cation: I12; J24; Q20 PsycINFO classi®cation: 2956; 4070