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The effect of parental labor supply on child schooling: evidence from trade liberalization in India

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Abstract

This paper estimates the effect of changes in maternal and paternal labor supply on the schooling rates of children in India using the variation in industry-specific tariffs during a period of trade liberalization. The results show that an increase in maternal labor supplied outside of the household leads to a higher schooling probability for younger children. Specifically, a 1 day per week increase in maternal labor supply is associated with an approximately 5 % points increase in the schooling probability for children between the ages of 7 and 10. However, father’s labor supply has an insignificant effect on child schooling across all specifications. The effect for older children between the ages of 11 and 14, who face a tradeoff between schooling, market work, and domestic work, is also found to be insignificant.

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Notes

  1. Unitary household models that assume income pooling and a representative household utility function have generally been rejected by the empirical evidence (Browning and Chiappori 1998; Chiappori 2011; Duflo 2003; Duflo and Udry 2001; Pitt et al. 1990; Quisumbing and Maluccio 2003; Thomas 1991).

  2. If maternal and paternal labor supplies are perfect substitutes, the reduction in a mother’s labor supply may be balanced by a proportional increase in a father’s labor supply. In this case, we should see a positive effect for the father (Lundberg and Rose 2000 and 2002).

  3. Child quality and quantity are measured in real numbers.

  4. The above result represents the substitution effect and rules out the income effect due to quasi-linear preferences.

  5. In addition to the quinquennial surveys based on thick samples, the NSS Organization also implements additional surveys between the successive quinquennial rounds that are based on much smaller thin samples.

  6. The types of activities include: working in a household enterprise as an own account worker, employer, or unpaid family worker; working as a regular salaried/wage employee; working as a casual wage laborer in public works or in other types of work; attending an educational institution; attending to domestic duties; and engaging in the free collection of goods for household use.

  7. We exclude multiple family households, as the interaction between different families within these households may alter the child outcomes. We also exclude households in which one of the parents is absent.

  8. Similar results were shown for rural North India by Kis-Katos (2012).

  9. Although some children are reported to attend school at ages 5 or 6, we do not include this age group in our analysis, as a significant proportion of these children are attending pre-school from which some parents may opt out even when they have strong preferences towards education.

  10. The NSS reports labor supply as the number of days in a week, which we use throughout this study. One could multiply these numbers by the usual work hours per day in India, in order to represent the results in hours instead of days.

  11. For example, the industrial category “cotton textiles” includes both machinery and chemicals as inputs. The average tariff rate for this industry is therefore composed of tariffs in finished products as well as these inputs. Because each round of the survey data reports a different version of the NIC classifications, the concordance tables are used in order to make these classifications consistent across rounds.

  12. Specifically, we use the 1986 tariffs for the 43rd round, and the 1998 tariffs for the 55th round. The 1986 tariff rates are extrapolated using the percentage reduction between 1988 and 1989. Because the tariff rates remained constant prior to the trade liberalization in 1991, there was little to no change over this time period. We additionally used the 1- and 3-year lags and found that they provide similar results.

  13. The results from censored Tobit model turned out to be very similar to the Heckman model. In this paper, the Heckman model is preferred, as it provides a more flexible framework to account for selection in the subsequent analysis.

  14. While Glick and Sahn (1998) used assets and non-labor household income as instruments, they suggest prices as plausible instruments as well. Tariff rates are strongly linked to domestic prices through cost minimization, as suggested by the tariff pass-through literature.

  15. While the tariffs in all industries were significantly reduced, India maintained the non-tariff trade barriers until late 1998 for certain consumption such as rice wheat and oilseeds (Panagariya 1999). Tariffs for these products were nonbinding until these barriers were removed. In order to assess the importance of these restrictions, we set the tariff changes for agricultural commodities between 1988 and 2000 equal to zero, and re-estimate our model. The results suggest that the coefficients are robust to this modification.

  16. The details of these estimation results, as well as the descriptive analysis of the gender composition instruments, can be found in the working paper version of this study, which is available at http://ideas.repec.org/p/ris/albaec/2011_021.html.

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Acknowledgments

We thank two anonymous referees and the editorial team for their valuable comments and suggestions. We would also like to thank the participants of the Midwest International Trade Meetings at Penn State University, the CESifo Area Conference on Global Economy in Munich, the University of New South Wales, and the CEA meetings at Quebec City, especially Peter Egger and Ana Dammert, for their comments on an earlier version of this paper, and Alausa Waleem for his excellent research assistance.

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Correspondence to Beyza Ural Marchand.

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Ural Marchand, B., Rees, R. & Riezman, R. The effect of parental labor supply on child schooling: evidence from trade liberalization in India. Rev Econ Household 11, 151–173 (2013). https://doi.org/10.1007/s11150-013-9175-z

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