Abstract
The schooling repayment hypothesis for private transfers predicts a positive relationship between the amount of parental investment in children’s education and the amount that adult children transfer to their parents. We provide evidence on the repayment motive using data from the Mexican conditional cash transfer program PROGRESA/Oportunidades (PO). PO pays a transfer to parents for sending their children to school. Thus, if private transfers from adult children to parents are in part repayment for parental schooling investments made in the past, then PO should decrease these transfers—parents were already exogenously compensated by the government for sending their kids to school and not to work. Exploiting the exogenous variation in the amount of cash transfers a household receives from PO for sending its children to school, we compare the private transfers received in 2007 by parental households who had children 0–16 in 1997 and started receiving the programs’ benefits in 1998 with the transfers received by similar parental households who started receiving benefits in 1999. Results suggest a repayment motive exists. That is, PO is causing adult children to transfer less resources to their parents.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
A recent paper on what motivates transfers from adult children to parents in South Korea is Park (2014). For surveys of the literature on the determinants of transfers from adult children to parents, see Laitner (1997) and Arrondel and Masson (2006). For developing countries, see, for instance, Cox and Jimenez (1992) and Cox et al. (1998).
For instance, early work by Lillard and Willis (1997) finds that the number of children with higher educational attainments has a positive effect on the transfers received by parents using data from Malaysia. Also using Malaysian data, Park (2003) finds no significant effect of the educational attainment of children on the monetary transfers paid to parents after controlling for children’s income and other characteristics. Raut and Tran (2005) use Indonesian data and find that the positive effect of an adult child’s educational attainment on the transfers made to her parents is sensitive to the empirical specification.
By doing this, we keep only families with age-qualifying children in 1997 to reduce heterogeneity and reduce noise in our transfers data. Children who are older than 16 are more likely to transfer money to their parents because they are (relatively) the oldest children. However, it is unlikely that these children have been affected by PO. If we add these children to our sample, results remain qualitatively the same, but statistical significance gets lost.
These are the standard entry ages to each schooling level in Mexico. When calculating program exposure, we also take into account that PO starts paying schooling transfers to parents when their children get enrolled and attend third grade, which is when children are about 8 years old, and that the program started providing schooling grants for high school in 2001.
In our data, 74 percent of 14 year olds in 1997, 56 percent of 15 year olds, and 39 percent of 16 year olds were enrolled in 1997 in a grade that would made them eligible to receive transfers from PO by the time the program started in 1998. Furthermore, Behrman et al. (2005) suggest that some children re-entered school after the program was implemented in their localities.
Throughout the paper we refer to children who left the parental household by 2007 as “absent children”.
Age, gender, years of schooling, a dummy for married and the number of male children he had in 1997.
Our results do not change significantly if we remove the locality fixed effects from our regressions. If anything, our standard errors become a bit smaller.
Children who were 10 years old in 1997 had two additional years of program exposure if their household was incorporated into PO in 1998, compared to same-aged children incorporated into PO later on: one year in primary school, and the other in secondary school. We group these children together with children who had additional program exposure during secondary school only in order to cleanly separate them from children who were differentially exposed to PO only during their primary school years.
The income effect refers to the effect on transfers received by adult children that can be attributed to the fact that the parental household might have more income after receiving the PO transfers. The altruistic model would predict this effect is negative, but in other models, like in the exchange one, it could be positive under certain conditions.
For our main estimations, we check whether including these potentially bad regressors changes our results and find no evidence of this.
For instance, in 1997, before the start of PO, 54 percent of children age 14 was enrolled in school and 23 percent was already working in the labor market. These percentages are 30 and 36, respectively, for children age 16.
This postponement could also arise for other reasons not discussed here.
For this exercise, we use individual level data for the 9576 children in our sample. We observe whether the adult children are absent or not from the parental household in 2007. Of those who are absent in 2007, the survey provides further information on the motives for migrating and the date of departure for only 1669 adult children through a migrant questionnaire. For our sample of all children, about 35 percent are absent in 2007. Of those with information from the migrant questionnaire 33 percent left the household due to marriage, 6 percent for studying, 56 percent for work and 4 percent for other reasons.
Dummies for age in 1997 (6–9, 10–13 and 14–16, to be consistent with main estimations in Sect. 2).
Age, education, dummies for male and married.
Angelucci (2005) finds no effect of PO on migration for those children of secondary and high school age who were exposed to the program.
Indeed, the effect of being in an early treated locality on the probability of migrating is not statistically different from zero.
Within every locality where the program has been implemented, households are noneligible to receive PO’s benefits if they are above the poverty level as determined by discriminant analysis on census data.
Household assets include properties (except agricultural plots), vehicles, agricultural and nonagricultural machinery, electronics, household appliances, jewelry, animals, and other assets. The survey asks how many of these assets are owned by the household and also how much would the family sell the asset for. We calculate the value of assets multiplying the number of particular assets by the median price reported by households in each locality. We are aware of the measurement error issues that arise by doing this, so we are presenting the results in Table 6 only as additional evidence. Expenditure per capita is calculated as total household expenditure divided by the total number of household members in 2007, without adjusting for the number of children versus adults in the household. This is a very crude measure, but once again, we use it just as additional evidence.
This would hold if the parent is forward looking and used the PO transfers he received when his children were young to accumulate assets in order to use them for consumption purposes in the future, as he (correctly) anticipated not to receive any transfers from his children.
References
Angelucci, M. (2005). Aid programs’ unintended effects: The case of progresa and migration. University of Arizona Working Paper 05-16. http://ssrn.com/abstract=868646. Accessed July 19, 2015.
Arrondel, L., & Masson, A. (2006). Altruism, exchange or indirect reciprocity: What do the data on family transfers show? In S.-C. Kolm & J. M. Ythier (Eds.), Handbook on the economics of giving, reciprocity and altruism (Vol. 2, pp. 971–1053). Amsterdam: Elsevier Science.
Bautista Arredondo, S., Bertozzi, S. M., Leroy, J. L., Ridaura, R. L., Sosa Rubí, S. G., Rojo, M. M. T., et al. (2008). Diez años de Oportunidades en zonas rurales: efectos sobre la utilización de servicios y el estado de salud de sus beneficiarios. In Evaluación externa del Programa Oportunidades 2008. A diez años de intervención en zonas rurales (1997–2007). Tomo II, El reto de la calidad de los servicios: resultados en salud y nutrición. Mexico City: Secretaría de Desarrollo Social.
Becker, G. S. (1993). Nobel lecture: The economic way of looking at behavior. Journal of Political Economy, 101(3), 385–409.
Behrman, J. R., & Hoddinott, J. (2001). An evaluation of the impact of PROGRESA on pre-school child height. International Food Policy Research Institute, Food Consumption and Nutrition Division Discussion Paper 104. http://ebrary.ifpri.org/cdm/ref/collection/p15738coll2/id/75294. Accessed July 19, 2015.
Behrman, J. R., Parker, S. W., & Todd, P. E. (2011). Do conditional cash transfers for schooling generate lasting benefits? A five-year follow up of PROGRESA/Oportunidades. Journal of Human Resources, 46(1), 93–122.
Behrman, J. R., Sengupta, P., & Todd, P. E. (2005). Progressing through PROGRESA: An impact assessment of a school subsidy experiment. Economic Development and Cultural Change, 54(1), 237–276.
Bobonis, G. J., & Finan, F. (2009). Neighborhood peer effect in secondary school enrollment decisions. Review of Economics and Statistics, 91(4), 695–716.
Cigno, A. (1993). Intergenerational transfers without altruism: Family, market and state. European Journal of Political Economy, 9(4), 505–518.
Cox, D., Eser, Z., & Jimenez, E. (1998). Motives for private transfers over the life cycle: An analytical framework and evidence for Peru. Journal of Development Economics, 55(1), 57–80.
Cox, D., & Jimenez, E. (1992). Social security and private transfers in developing countries: The case of Peru. World Bank Economic Review, 6(1), 155–169.
Cox, D., & Stark, O. (1994). Intergenerational transfers and the demonstration effect. Boston College Working Paper 329. http://dlib.bc.edu/islandora/object/bc-ir:102916. Accessed July 19, 2015.
Ehrlich, I., & Lui, F. T. (1991). Intergenerational trade, longevity and economic growth. Journal of Political Economy, 99(5), 1029–1059.
Gertler, P. J. (2000). Final report: The impact of PROGRESA on health. International Food Policy Research Institute, November. http://ebrary.ifpri.org/cdm/ref/collection/p15738coll2/id/125436. Accessed July 19, 2015.
Guttman, J. M. (2001). Self-enforcing reciprocity norms and intergenerational transfers: Theory and evidence. Journal of Public Economics, 81(1), 117–151.
Laitner, J. (1997). Intergenerational and interhousehold economic links. In M. R. Rosenzweig & O. Stark (Eds.), Handbook of population and family economics (Vol. 1, pp. 189–238). Amsterdam: Elsevier Science.
Lalive, R., & Cattaneo, A. M. (2009). Social interactions and schooling decisions. Review of Economics and Statistics, 91(3), 457–477.
Lillard, L. A., & Willis, R. J. (1997). Motives for intergenerational transfers: Evidence from Malaysia. Demography, 34(1), 115–134.
Park, C. (2003). Are children repaying parental loans: Evidence from Malaysia using matched child-parent pair. Journal of Population Economics, 16(2), 243–263.
Park, C. (2014). Why do children transfer to their parents? Evidence from South Korea. Review of Economics of the Household, 12(3), 461–485.
Raut, L., & Tran, L. H. (2005). Parental human capital investment and old-age transfers from children: Is it a loan contract or reciprocity for Indonesian families? Journal of Development Economics, 77(2), 389–414.
Schultz, T. P. (2004). School subsidies for the poor evaluating a mexican strategy for reducing poverty. Journal of Development Economics, 74(1), 199–250.
Skoufias, E., & Parker, S. W. (2001). Conditional cash transfers and their impact on child work and schooling: Evidence from the PROGRESA program in Mexico. Economia, 2(1), 45–96.
Acknowledgments
We are grateful to Robert Garlick, Silvia Prina, Paul Schultz, and numerous conference and seminar participants at El Colegio de México, Oberlin College, NASM 2012 of the Econometric Society, LACEA 2012, NEUDC 2012, PopPov 2013, MIEDC 2013, and CESR at USC for helpful comments and discussions. The views expressed in this article are solely those of the authors and do not reflect those of Banco de México.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Chiapa, C., Juarez, L. The schooling repayment hypothesis for private transfers: evidence from the PROGRESA/Oportunidades experiment. Rev Econ Household 14, 811–828 (2016). https://doi.org/10.1007/s11150-015-9303-z
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11150-015-9303-z
Keywords
- Parental schooling investments
- Schooling repayment hypothesis
- Intergenerational transfers
- PROGRESA/Oportunidades