Parental Actions and Sibling Inequality

This paper sets forth a simple model of resource allocation within the family. The model is based on two main assumptions: there are non-convexities in human capital investments and parents cannot borrow to finance their children's education. The model shows that poor and middle-income parents will often find it optimal to channel human capital investments into a few of their children, thus creating sizable inequalities among siblings. The predictions of the model are consistent with the available evidence for three Latin American countries