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Consumption Risk and Human Capital Accumulation in India

Andrew Foster () and Esther Gehrke ()

No 24041, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the consequences of dynamic complementarities in the production of child human capital for the relationship between risk and schooling investment in a low income setting. In contrast to previous literature, we explore the ex ante response of schooling to risk. We develop a model that incorporates, dynamic complementarity in the education production function, ex-post labor market responses by mothers to income shocks, and substitutability between maternal and child work in the household. We test the model using data from rural India, focusing particularly on the schooling of girls. We find that risk substantially reduces the probability that girls attend school. We then simulate the effects of an implicit social insurance program, modeled after the National Rural Employment Guarantee Scheme (NREGS). Our results suggest that the risk-reducing effect of the NREGS may offset adverse effects on child education that were evident during the NREGS phase-in due to rising wages.

JEL-codes: I25 O13 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ltv
Date: 2017-11
Note: DEV ED
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