Advertisement

Parental risk aversion and educational investment: panel evidence from rural Uganda

  • Rayner TabetandoEmail author
Article
  • 27 Downloads

Abstract

In this paper we combine a unique large scale field experimental data on preferences and longitudinal household survey data from rural Uganda to estimate the impact of parental risk aversion, time preferences and loss aversion on educational investment. Our results show that parental risk aversion is increasing in wealth. On a whole, we find that risk aversion is positively correlated with educational investment measured in per school age child educational expenditure. Further analysis revealed that parental risk aversion is negatively associated with educational investment for poorer households. Pathway analysis suggests that risk averse households are less credit constrained. The hypothesis that parental risk aversion depresses educational investment may only be tenable for poor households’ in rural Uganda.

Keywords

Risk attitude Time preference Experiment Education Sub-Saharan Africa 

JEL Classification

J62 J38 

Notes

Acknowledgements

I hereby declare that this work did not benefit from any funding except the personal funds of the researcher. I will like to thank the National Graduate Institute for Policy Studies for granting me access to the data used in this study.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Ethical approval

All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.

References

  1. Anderson, S., Harrison, G. W., Lau, M. I., & Rutström, E. E. (2008). Lost in state space: Are preferences stable? International Economic Review, 49(3), 1091–1112.CrossRefGoogle Scholar
  2. Banerjee, A. V., & Newman, A. F. (1993). Occupational choice and the process of development. Journal of Political Economy, 101(2), 274–98.CrossRefGoogle Scholar
  3. Belzil, C., & Hansen, J. (2004). Risk aversion, education and earnings dispersion. Research in Labor Economics, 23, 335–358.CrossRefGoogle Scholar
  4. Belzil, C., & Leonardi, M. (2007). Can risk aversion explain schooling attainments? Evidence from Italy. Labour Economics, 14(6), 957–970.CrossRefGoogle Scholar
  5. Black, T. R., Namwadda, R., Mugambe, J., Walugembe, E., & Esanu, C. (1999). Educational growth in Uganda. International Journal of Educational Development, 19, 111–126.CrossRefGoogle Scholar
  6. Chamberlain, G. (1984). Panel Data. In Z. Grilliches & M. D. Intriligator (Eds), Handbook of economterics, Volume 2 (pp. 1248–318). Amsterdam: North-Holland Press.Google Scholar
  7. Chamberlin, J., & Ricker-Gilbert, J. (2016). “Participation in rural land rental markets in Sub-Saharan Africa: Who benefits and by how much? Evidence from Malawi and Zambia”. American Journal of Agricultural Economics, 00(0), 1–22.Google Scholar
  8. Chechi, D., Fiorio, C. V., & Leonardi, M. (2014). Parents’ risk aversion and children’s educational attainment. Labour Economics, 30(3), 164–175.CrossRefGoogle Scholar
  9. DeFraja, G. (2001). Education policies: Equity, efficiency and voting equilibrium. Economic Journal, 111(471), 104–119.CrossRefGoogle Scholar
  10. Deininger, K. (2003). Does cost of schooling affect enrollment by the poor? Universal primary education in Uganda. Economics of Education Review, 22, 291–305.CrossRefGoogle Scholar
  11. Dohmen, T., Falk, A., Huffman, D., & Sunde, U. (2010). Are risk aversion and impatience related to cognitive ability? American Economic Review, 100(3), 1238–1260.CrossRefGoogle Scholar
  12. Duflo, E., Kremer, M., & Robinson, J. (2011). Nudging farmers to use fertilizer: Theory and experimental evidence from Kenya. American Economic Review, 101(6), 2350–2390.CrossRefGoogle Scholar
  13. Galizzi, M., Machado, R., & Miniaci, R. (2016). Temporal stability, cross-validity, and external validity of risk preferences measures: experimental evidence from a UK representative. London, UK: The London School of Economics and Political Science, Department of Social Policy.Google Scholar
  14. Ganglmair, B. (2006). Intrinsic motivation, discrimination and the child labor-schooling trade-off: Some empirical findings. University of Bonn working paper.Google Scholar
  15. Glewwe, P., & Kremer, M. (2006). Schools, teachers, and educational outcomes in developing countries. In E.A. Hanushek & F. Welch (Eds), Handbook of the economics of education. Amsterdam, North Holland.Google Scholar
  16. Heckman, J., Stixrude, J., & Urzua, S. (2006). The effect of cognitive and noncognitive abilities on labor market outcomes and social behaviour. Journal of Labor Economics, 24(3), 411–482.CrossRefGoogle Scholar
  17. Holt, C. A., & Laury, K. (2002). Risk aversion and incentive effects. American Economic Review, 92, 1644–1655.CrossRefGoogle Scholar
  18. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263–292.CrossRefGoogle Scholar
  19. Kirby, K. (2009). One year temporal stability of discount rates. Psychonomic Bulletin & Review, 16(3), 457–462.CrossRefGoogle Scholar
  20. Kitaev, I. (2001). Private Education in Sub-Saharan Africa: A re-examination of theories and concepts related to its development and finance”. Paris: IIEP, UNESCO.Google Scholar
  21. Leonardi, M. (2007). Do parents risk aversion and wealth explain secondary school choice? Giornale degli. Economisti, 66(2), 177–206.Google Scholar
  22. Lehvari, D., & Weiss, Y. (1974). The effect of risk on the investment in human capital. American Economic Review, 64(6), 950–963.Google Scholar
  23. Lincove, J. A. (2012). The influence of price on school enrollment under Uganda’s policy of free primary education. Economics of Education Review, 31(5), 799–811.CrossRefGoogle Scholar
  24. Meier, S., & Sprenger, C. (2010). Present-biased preferences and credit card borrowing. American Economic Journal: Applied Economics, 2(1), 193–210.Google Scholar
  25. Mundlak, Y. (1978). On the pooling of time series and cross section data. Econometrica, 46(1), 69–85.CrossRefGoogle Scholar
  26. Nishimura, M., Yamano, T., & Sasaoka, Y. (2008). Impact of the universal primary education policy on educational attainment and private costs in rural Uganda. International Journal of Educational Development, 28, 161–175.CrossRefGoogle Scholar
  27. Ross, D. (2017). Parent’s beliefs and children’s education: Experimental evidence from Malawi. Unpublished Manuscript, University of Chicago: Chicago.Google Scholar
  28. Sawada, Y., & Lokshin, M. (2009). Obstacles to school progression in rural Pakistan: An analysis of gender and sibling rivalry using field survey data. Journal of Development Economics, 88, 335–347.CrossRefGoogle Scholar
  29. Schultz, T. P. (1993). Investments in the schooling and health of women and men: Quantities and returns. Journal of Human Resources, 28(4), 694–734.CrossRefGoogle Scholar
  30. Suzuki, I. (2002). Parental participation and accountability in primary schools in Uganda. Journal of Comparative and International Education, 32(2), 243–259.CrossRefGoogle Scholar
  31. Tanaka, T., Camerer, C., & Nguyen, Q. (2010). Risk and time preferences: Linking experimental and household survey data from Vietnam. American Economic Review, 100, 557–571.CrossRefGoogle Scholar
  32. Tanaka, Y., & Munro, A. (2014). Regional variation in risk and time preferences: Evidence from a large-scale field experiment in rural Uganda. Journal of African Economies, 23(1), 151–187.CrossRefGoogle Scholar
  33. Uganda Ministry of Education and Sport (MOES) (2014). Education Report.Google Scholar
  34. Wiki, M., Holden, S. T., & Shiferaw, B. (1998). Poverty, market imperfections, and time preferences: of relevance for environmental policy? Environment and Development Economics, 3, 105–130.CrossRefGoogle Scholar
  35. Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.Google Scholar
  36. Wölbert, E., & Rieldl, A. (2013). Measuring time and risk preferences: Reliability, stability, domain specificity. Netspar Discussion Papers.Google Scholar
  37. Yesuf, M. (2004). Risk, time and land management under market imperfections: Applications to Ethiopia, Part III: Time preferences of farm households in Ethiopia’, PhD dissertation, Göteborg University.Google Scholar
  38. Zeisberger, S., Vrecko, D., & Langer, T. (2012). Measuring the time stability of prospect theory preferences. Theory and Decision, 72(1), 359–386.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.National Graduate Institute for Policy StudiesTokyoJapan
  2. 2.JICA Research InstituteTokyoJapan

Personalised recommendations