Parental misbeliefs and household investment in children's education

We examine the effect of parental misbeliefs about their child's academic achievement on household investment in children's education in China. We find that nearly 60% of parents hold inaccurate beliefs about their child's educational performance. Parental upward biased beliefs are positively associated with both financial and time investment in their children's education. The results for financial and time investment are mainly driven by paternal and maternal upward biased beliefs, respectively, reflecting differences in credit and time constraints on each parent. We find that parental educational expectations, confidence in their child's future and parenting style are underlying mechanisms through which parental misbeliefs affect household education investment. Our findings suggest that mistaken parental beliefs may have an important role to play in narrowing educational inequality.