Management Science· 2026Q1
Trading Off Business and Family Investments: Evidence from U.S. Entrepreneurial Households
- 0citations
- Q1SCImago
- 2026year
Short summary
U.S. entrepreneurial households sharply reduce business revenues and expenses by 10-15% when children turn 18, reallocating capital towards human capital investments, with a $2.26 business expense decrease for every $1 increase in child-related spending.
AI-generated from the title and abstract; the full text is not read.
Key points
- Business revenues and expenses decline sharply (10-15%) when children turn 18.
- Profitability and productivity are largely unaffected by this downsizing.
- Downsizing is concentrated in highly indebted owner households and businesses with volatile cash flows.
- For every $1 increase in child-related spending, business expenses decrease by $2.26.
AI-generated from the title and abstract; the full text is not read.
Abstract
Investing in children’s human capital reduces business investments for U.S. entrepreneurial households. Using financial account data of 90,000 small businesses linked to their owners and a regression discontinuity design that compares the business performance of households with college-aged dependents (18–22) to those with near-college-aged dependents (14–17), I show that business revenues and expenses decline sharply when owners’ children reach age 18. Despite the declines, profitability and productivity remain largely unaffected, suggesting a general downsizing rather than a loss in efficiency. Heterogeneity analysis shows that downsizing is concentrated among highly indebted owner households and businesses with volatile cash flows. For each dollar increase in household spending associated with a child turning 18, business expenses decline by $2.26. These findings are consistent with entrepreneurial parents reallocating capital from business investments toward their children’s human capital, as both compete for the same pool of internal family financial resources. This paper was accepted by Camelia Kuhnen, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.04789 .
The authors' abstract, as published at the source. Management Science, 2026 · DOI ↗
Continue with a free account
Ask the paper: 3 free questions a day about this paper; save it, get its citation, new summaries every day for your field. Takeaways are Premium.
Continue free on the webSign in with Google or Apple; no card needed. You come back to this paper.
On your phone:
Field: Organizational Behavior and Human Resource Management
Organizational Behavior and Human Resource ManagementBusiness, Management and Accounting