with George Kudrna, John Piggott
Read abstract + Hide abstract −
We examine the impact of the social norm of intergenerational support to aging parents on fertility and education investment decisions in developing economies. We develop a life cycle model with endogenous fertility and education investment choices and incorporate the expectation of transfers from children based on the social norm. Using household survey data from Indonesia, we estimate earnings profiles and uncertainties over the life cycle to capture the financial constraint that parents face and the transfers from adult children to parents, which indicate the current strength of the norm in the 2000s. The model is estimated to match key moments in fertility and education. Counterfactual experiments show that a weakening of the norm could reduce the fertility rate and significantly affect educational attainment, highlighting the importance of intergenerational transfers in shaping fertility and education decisions and in explaining intergenerational education mobility in developing economies.