Cipollone, Angela (2011): Education as a precautionary asset.
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By using data from the latest wave of the Indonesia Life Family Survey, the present work investigates whether and to which extent child time allocation depends on the joint impact of liquidity constraints and risk attitudes. We employ a double selection model of school hours, by adding time preferences, risk attitudes and proxies of risks and shocks among the relevant regressors, and controlling for sample selection and endogeneity of liquidity constraints and school enrolment. To this aim, we exploit measures of time preferences and risk attitudes elicited from individuals’ responses to hypothetical gambles and consider the past occurrence of shocks to proxy the risk profiles of the households under the assumption that households use past income volatility to predict future volatility. It will be shown that, under liquidity constraints, risk averse parents raise a precautionary demand for education as an ex-ante risk coping strategy, so to insure future consumption through higher returns from their children’s work.
|Item Type:||MPRA Paper|
|Original Title:||Education as a precautionary asset|
|Keywords:||schooling; risk aversion; liquidity constraints; risks; shocks|
|Subjects:||J - Labor and Demographic Economics > J1 - Demographic Economics > J13 - Fertility; Family Planning; Child Care; Children; Youth
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply
D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
|Depositing User:||Angela Cipollone|
|Date Deposited:||07. Nov 2011 18:38|
|Last Modified:||17. Feb 2013 09:47|
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