Do financial worries lead poor parents to miss high-return opportunities to invest in their children even when they would have the financial means to do so? We study this question in the context of an educational program in Brazil, whose child-specific impacts on the probability of advancing to the next grade can be predicted by applying machine learning techniques to results from a previous experiment. In the absence of the program, low-SES students were expected to fail the grade almost 4 times more often than high-SES ones. The program was predicted to benefit nearly every student, but had particularly high returns for low-SES ones: if take-up were universal, the SES gap in expected grade repetition would be nearly 25% lower. Nevertheless, poor parents invested 37.5% less in the program. Combining multiple experiments, we show that financial worries reallocate poor parents’ attention to immediate needs, leading them to respond inefficiently to investment returns. Consistently, modifying the decision environment to make investment returns salient unlocks the contributions of the program to inequality reduction.

Bio: Guilherme is the UNICEF Assistant Professor of Economics at the University of Zurich and chairman at its Center for Child Well-being and Development. He holds a PhD in Political Economy and Government from Harvard University. He is also a social innovation specialist at the World Economic Forum Expert Network, and co-founder and chairman at Movva. Guilherme was acknowledged by the Schwab Foundation and Folha de São Paulo as Brazil's top-10 social entrepreneur of the year (post-COVID legacy) in 2020, and by MIT Technology Review as Brazil's top social innovator among under-35 entrepreneurs in 2014.