Fertility and Education Decisions in Developing Countries: The Role of Social Norms

Trang Le, George Kudrna and John Piggott

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper studies how the social norm of intergenerational support, where parents anticipate financial assistance from their adult children in old age, influences fertility and education investment decisions in developing countries. We develop a dynamic life-cycle model with uncertain labor income and endogenous fertility and education choices, incorporating expectations of private transfers driven by this norm. Using data from the Indonesian Family Life Survey, we estimate labor income profiles and income risks, account for parental financial constraints, and document the prevalence of intergenerational transfers in the 2000s. The model is calibrated to match key empirical patterns in fertility and schooling. Counterfactual simulations reveal that a weakening of this social norm leads to declines in both fertility and educational investment, particularly among lower-educated parents. Our findings underscore the central role of intergenerational transfers in shaping demographic and human capital outcomes and provide new insights into the persistence of educational inequality in developing economies.

Keywords: fertility; human capital; education investment; intergenerational transfers; life-cycle model (search for similar items in EconPapers)
JEL-codes: D15 J13 J24 J62 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2025-12
New Economics Papers: this item is included in nep-dge, nep-lab, nep-sea and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2025-66

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