NBER

Esther I. Gehrke

University of Goettingen
Department of Agricultural Economics
and Rural Development
Platz der Goettingen Sieben 5
37073 Goettingen
Germany

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Goettingen

NBER Working Papers and Publications

November 2017Start What You Finish! Ex Ante Risk and Schooling Investments in the Presence of Dynamic Complementarities
with Andrew D. Foster: w24041
We study the relationship between risk and schooling investment in a low income setting, with a particular focus on possible ex ante effects. We first present a model that shows that such effects can arise if the human capital production function exhibits dynamic complementarity and parental preferences for human capital are not too concave. We then estimate the key parameters of the model using multiple rounds of panel data from rural India that contain, in each round, three seasons of time allocation for each sampled child. These estimates suggest an elasticity of schooling investments with respect to risk of -0.09 in this context. We then use cross-round differences in village-level irrigation interacted with rainfall variability to estimate the relationship between income risk a...

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