Identifying non-cooperative behavior among spouses: Child outcomes in migrant-sending households

I propose a model of household decision-making under asymmetric information and show that resulting allocations may not be fully cooperative. The model yields a simple test for cooperative decision-making, which I apply to data from China. I find that, when the father migrates without his family, children spend more time in household production, while mothers spend less time in both household production and income-generating activities. This is not consistent with standard cooperative models of the household: simply reallocating time to compensate for the father's absence would cause an increase in household labor for both children and mothers and, if migration occurs in response to a negative shock, we should observe an increase in mothers' time in income-generating activities rather than a reduction. The results also do not appear to be driven by an increase in mothers' bargaining power, as children's human capital is not affected by migration, controlling for income.     

Can conditional cash transfer programs serve as safety nets in keeping children at school and from working when exposed to shocks?

Income shocks on poor households are known to induce parents to take their children out of school and send them to work when other risk-coping instruments are insufficient. State dependence in school attendance further implies that these responses to short-run shocks have long-term consequences on children's human capital development. Conditional cash transfer (CCT) programs, where the condition is on school attendance, have been shown to be effective in increasing educational achievements and reducing child work. We ask the question here of whether or not children who benefit from conditional transfers are protected from the impacts of shocks on school enrollment and work. We develop a model of a household's decision regarding child school and work under conditions of a school re-entry cost, conditional transfers, and exposure to shocks. We take model predictions to the data using a panel from Mexico's Progresa experience with randomized treatment. Results show that there is strong state dependence in school enrollment. We find that the conditional transfers helped protect enrollment, but did not refrain parents from increasing child work in response to shocks. These results reveal that CCT programs can provide an additional benefit to recipients in acting as safety nets for the schooling of the poor.     

Free‐Riding and the Provision of Public Goods in the Family: A Laboratory Experiment*

We examine the provision of family public goods using experimental economics methods. With sufficient altruism and shared resource arrangements, families can provide the efficient level of family public goods. Becker's Rotten Kid Theorem asserts that transfers from altruistic parents will induce children to maximize family income even if children are not altruistic toward other family members. Consistent with altruism, parents and children contributed more to a public good when in groups with family members than when in groups with strangers. In contrast to the predictions of the Rotten Kid Theorem, however, children's behavior fell short of maximizing family income.     

Family Altruism and Incentives

This paper characterizes the pattern of intergenerational transfers that emerges in an altruistic model of the family when children's effort is explicitly made endogenous and parents have imperfect information on the stochastic income realizations of their children. It is shown that, if parents can credibly commit to a pattern of transfers, they will choose not to compensate children in bad outcomes as much as predicted by the standard (no uncertainty, no asymmetric information) dynastic model of the family. In this context, Ricardian equivalence holds whenever non‐negativity constraints are not binding.     

Remittances and savings from international migration: Theory and evidence using a matched sample

The central question of this paper concerns the implications of remittance flows for migrants and their origin households in the country of origin. This paper represents the first attempt to present a disaggregated view of international remittance flows using a matched sample of international migrants and their origin families. I investigate two types of remittances: transfers to the home family and savings in the country of origin. The empirical evidence provides support for the altruistic model of transfer behavior. Wealthier origin families tend to receive lower transfers, other things being equal. However, remittances sent to finance origin country investments are positively associated with origin household wealth. The estimation strategy addresses two common problems that arise in investigating remittance behavior: omitted variable bias and the measurement of origin household resources.     

Household bargaining over fertility: Theory and evidence from Malaysia

We develop and test a model of household bargaining over fertility when transfers between spouses are possible. The model makes precise how the fertility preferences of each spouse translate into fertility outcomes. We show this depends on whether or not spouses can commit to their future actions within marriage. If couples bargain with commitment, fertility outcomes take account of both spouses' fertility preferences and do not depend on the threat point in marital bargaining. If couples bargain without commitment, the influence of each spouse's fertility preference on fertility outcomes depends on the relevant threat point in marital bargaining, and the distribution of bargaining power. We test the models using household data from the Malaysia Family Life Survey. This data set contains information on each spouse's desired fertility level, as well as fertility outcomes. We exploit differences in threat points in marital bargaining across ethnic groups to help identify the underlying bargaining model. The evidence suggests couples bargain without commitment.     

Family networks and school enrolment: Evidence from a randomized social experiment

We present evidence on whether and how a household's behavior is influenced by the presence and characteristics of its extended family. Using data from the PROGRESA program in Mexico, we exploit information on the paternal and maternal surnames of heads and spouses in conjunction with the Spanish naming convention to identify the inter- and intra-generational family links of each household to others in the same village. We then exploit the randomized research design of the PROGRESA evaluation data to identify whether the treatment effects of PROGRESA transfers on secondary school enrolment vary according to the characteristics of extended family. We find PROGRESA only raises secondary enrolment among households that are embedded in a family network. Eligible but isolated households do not respond. The mechanism through which the extended family influences household schooling choices is the redistribution of resources within the family network from eligibles that receive de facto unconditional cash transfers from PROGRESA, towards eligibles on the margin of enrolling children into secondary school.     

Child fostering in Africa: When labor and schooling motives may coexist

The paper proposes a theoretical framework for understanding purposive child fostering in Africa, whereby a non-orphaned child is sent to live temporarily with relatives. In the model, adults decide whether to foster in or out a child in conjunction with other household choices, e.g. own time allocation between market and non-market activities, children's amount of work, and schooling. By allowing for positive externalities from fostering, and thus asymmetric motives for fostering in (labor) and out (human capital), the proposed framework predicts that school-age children are sent to better-off households and that some families may foster in and out simultaneously. The model identifies the conditions under which all actors involved, children included, may benefit from fostering arrangements, but also points to situations where fostering may become an opportunity to marginalize a subset of children. The paper aims to provide a sound theoretical foundation that sheds light on why there exists mixed empirical evidence on the effects of fostering on children's well being, and cautions against demonizing non-parent residence as unequivocally detrimental to children.     

FAMILY SAFETY NETS AND ECONOMIC TRANSITION: A STUDY OF WORKER HOUSEHOLDS IN POLAND

Can Eastern European families most severely impoverished during the transition to capitalism rely on private family safety nets? This question is likely critical for the transition's success, but little is known about family networks in Eastern Europe. We analyze newly available Polish household surveys, conducted both before and after Poland's economic transition, which measure private inter-household transfers. Such transfers are large and widespread in Poland, and in many ways appear to function like means-tested public transfers. They flow from high to low-income households and are targeted to young couples, families with many children and those experiencing illness. Private transfer patterns also suggest that they are responsive to liquidity constraints. Our results from 1987 data indicate that private transfers could fill a non-trivial portion of the income gap left by unemployment. However, we also find evidence from 1992 data suggesting that family networks weakened somewhat after the transition.     

Child labor and schooling response to changes in coca production in rural Peru

Coca eradication and interdiction are the most common policies aimed at reducing the production and distribution of cocaine in the Andes, but little is know about their impact on households. This paper uses the shift in the production of coca leaves from Peru to Colombia in 1995 to analyze the indirect effects of the anti-coca policy on children's allocation of time. After different sensitivity checks, the results indicate that a decrease in coca production is associated with increases in work and hours children living in coca-growing states devote to work within and outside the household, with no effects on schooling outcomes. These findings suggest a previously undocumented indirect effect of drug policies on household behavior.     

On the demand for grandchildren: tied transfers and the demonstration effect

It is argued that parents provide help with housing downpayments in order to encourage the production of grandchildren, and that such a subsidization emanates from the “demonstration effect:” a child's propensity to furnish parents with attention and care can be conditioned by parental example. Parents who desire such transfers in the future have an incentive to make transfers to their own parents in order to instill appropriate preferences in their children. This generates a derived demand for grandchildren since potential grandparents will be treated better by their adult children if the latter have their own children to whom to demonstrate the appropriate behavior. Empirical work indicates behavior consistent with subsidization of the production of grandchildren and the demonstration effect.     

Mortality risks,education and child labor

In this paper, we investigate the role of young adult mortality on child labor and educational decisions. We argue that mortality risks are a major source of risks in returns to education in developing countries. We show that, in the absence of appropriate insurance mechanisms, the level of child labor is inefficient, but it can be too high or too low. It is too high when parents are not very altruistic and anticipate positive transfers from their children in the future. Uncertain returns to education, endogenous mortality or imperfect capital markets unambiguously increase child labor. When the level of child labor is inefficiently high, we also show that a cash transfer conditional on child's schooling can always restore efficiency regarding child labor.     

Motives for household private transfers in Burkina Faso

Resource transfers among households have received considerable interest among economists in recent years. Two of the main reasons for the surge of interest in household transfers are the information on human nature conveyed by transfer behavior and the implication on income redistribution policy that private transfer might have. Empirical studies, however, provide mixed results on transfer behavior. This is because previous inquiries were confronted with several estimation issues and have focused on data from developed countries where private transfers are already small. This paper contributes to the literature on transfer behavior by using a multifaceted econometric approach to examine the motives of household transfers in Burkina, a low-income country with a well-documented tradition of gift exchanges. The findings suggest that risk sharing is not central to transfers. Altruistic transfers are apparent for the middle income class, but not at low income level. The evidence implies that crowding out may be minimal at low income level, suggesting that public transfers targeting poor households may be effective.     

A dynamic model of altruistically-motivated transfers

This paper studies a dynamic Markovian game of two infinitely-lived altruistic agents without commitment. Players can save, consume and give transfers to each other. We identify a continuum of equilibria in which imperfectly-altruistic agents act as if they were a perfectly-altruistic dynasty which is less patient than the two agents themselves. In such equilibria, the poor agent receives transfers until both effectively pool their wealth and tragedy-of-the-commons-type inefficiencies occur. We also provide a sharp characterization of strategic interactions in consumption and transfer behavior. This provides new insights relative to existing two-period models. It allows us to differentiate between the Samaritan's dilemma – e.g. a child runs down its assets inefficiently fast in anticipation of transfers – and what we refer to as the Prodigal-Son dilemma – e.g. parents do not leave an early bequest, anticipating a child's profligate behavior.     

A STOCHASTIC DYNAMIC MODEL OF THE MENTAL HEALTH OF CHILDREN*

We estimate the parameters of a dynamic multiperiod model where parents with one child periodically decide whether their child uses mental health services. In this model, parents receive utility from household consumption and from their child's mental health. Mental health services may improve the child's mental health, but may be costly in terms of reduced household consumption and direct disutility. We find that mental health services can slightly improve a child's mental health, but the use of services accounts for a small fraction of the improvement of the mental health of the children in our sample.     

Can information alone change behavior? Response to arsenic contamination of groundwater in Bangladesh

We study how effectively information induces Bangladeshi households to avoid a health risk. The response to information is large and rapid; knowing that the household's well water has an unsafe concentration of arsenic raises the probability that the household changes to another well within one year by 0.37. Households who change wells increase the time spent obtaining water fifteen-fold. We identify a causal effect of information, since incidence of arsenic is uncorrelated with household characteristics. Our door-to-door information campaign provides well-specific arsenic levels without which behavior does not change. Media communicate general information about arsenic less expensively and no less effectively.     

Expenditure on children: A Rothbarth-type method consistent with scale economies and parents' bargaining

We suggest a new methodology to estimate the share of household income accruing to children. The household behavior is represented according to the collective approach. That is, each household member is characterized by specific preferences. Following the principle of the Rothbarth approach, the identification of the children's share requires the observation of adult-specific goods. Our method differs from this traditional approach in that it is compatible with economies of scale as well as with parents' bargaining. We illustrate the method with an application to the French Household Budget Survey.     

Family Transfers Involving Three Generations

Most models of family transfers consider only two generations and focus on two motives: altruism and exchange. They also assume perfect substitution between inter-vivos downward transfers and bequests. Based on French evidence, we show that parent-to-child transfers belong to three distinct categories (investment in child's education, financial assistance, wealth transmission), and advocate a three -generation framework. Thus, transfer behavior of parents toward their children is strongly influenced by the behavior of their own parents. There is also some evidence of the Cox and Stark demonstration effect: parents help their own parents, expecting to receive comparable support from their children. Such behavior can be regarded as indirect reciprocity : the beneficiary does not give back to the initial giver but to a third person of another generation.
JEL classification : D 10; D 31; D 63; D 64     

Migration,Transfers and Child Labor

We examine agricultural child labor in the context of emigration, transfers and the ability to hire outside labor. We start by developing a theoretical background and show how hiring labor from outside the household and transfers to the household might induce a reduction in children's working hours. Analysis using Living Standards Measurement Survey (LSMS) data on the Kagera region in Tanzania lend support to the hypothesis that both emigration and remittances reduce child labor.     

Estimating the Private Economic Benefits of Sons Versus Daughters in India

In order to understand the economic incentives behind gender discrimination in India, this paper provides the first estimates of the magnitude of the economic benefits of having a son instead of a daughter. The study estimates large gains from a first-born son to per capita income and expenditure, household assets, and a reduction in the probability the household is below the poverty line. Estimates show that a first-born son may provide economic advantages through a reduction in total children born and also from an adult son’s labor supply contribution to his parents’ household. The observed pattern of incentives is also compared with observed patterns in sex selection as a test of whether the relative economic value of first-born sons and daughters can explain the prevalence of sex-selective abortion.