Household Income Dynamics and Investment in Children: Evidence from India

Sowmya Dhanaraj, Smit Gade and Christy Mariya Paul
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Smit Gade: Good Business Lab
Christy Mariya Paul: Madras School of Economics

Working Papers from Madras School of Economics,Chennai,India

Abstract: Income shocks on households in developing countries are known to have an impact on the investment in the education of children. In this paper, we explore the effects of various income and expenditure shocks on educational investment and cognitive outcomes of children. In order to understand the mechanisms through which shocks affect children’s human capital we employ a range of dependent variables that capture input, output and outcome measures of education. We use three rounds of household-level panel data from Young lives survey conducted in two southern states of India, Andhra Pradesh and Telangana. Dynamic Panel data model using system General Method of Moments (GMM) estimator is used for investigating the impact of various income and expenditure shocks on children’s education and cognitive abilities. We find that idiosyncratic shocks like paternal health shocks and livestock loss translate into lower inputs of children’s education which in turn reduce their cognitive ability captured through vocabulary and mathematics tests. The results also suggest that these shocks mainly affect children’s development through decreased time spent in school.

Keywords: income shocks; child time use; test scores; dynamic panel estimation (search for similar items in EconPapers)
JEL-codes: I20 I24 I30 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-06
New Economics Papers: this item is included in nep-agr
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Related works:
Journal Article: Household income dynamics and investment in children: Evidence from India (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:mad:wpaper:2018-177

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