We show that in family or household firms, credit constraints can make business investment a direct competitor to educational investment. We test this theory on data collected in Cameroon. Households that are not restricted by credit constraints invest more in education when demand for the product they produce and sell increases. However, credit-constrained households react in the opposite way: when demand increases, they invest less in education, as predicted by our theory. We obtain these results controlling for endogeneity of family size, of demand conditions, and credit constraints.
The title of the paper has the following origin. The composer’s father, Franz Theodor Schubert, ran a school which he had taken over and reformed to make it more attractive to middle-class parents. Franz Theodor obliged his son to work in the school as a teacher for some years rather than to try his luck as a professional musician. To what extent this was because the father could not afford to invest in his son’s musical career (the hypothesis of our paper) or because he could not find a good substitute for his son’s teaching skills on the open market we are not in a position to say. Suffice it to say that the composer eventually broke free of this constraint and went on to work as a musician and composer, including as the teacher of Count Esterhazy. The rest of the story, as they say, is history – but we would like to claim that it is also economics.