Parental Investment in Children

How do poor par­ents plan to and ef­fec­tive­ly share re­sources with their chil­dren over time? Un­der­stand­ing how par­ents’ plans change as they get clos­er to de­ci­sion time can pro­vide in­sight into why in­vest­ments in chil­dren’s hu­man cap­i­tal are sys­tem­at­i­cal­ly low in de­vel­op­ing coun­tries, de­spite high re­turns.

CCWD supports the Sustainable Development Goals

The Sus­tain­able De­vel­op­ment Goals of this Pro­ject

Poor par­ents of­ten make am­bi­tious plans to in­vest in their chil­dren’s health or ed­u­ca­tion in the fu­ture. In prac­tice, how­ev­er, such plans are of­ten frus­trat­ed by re­al­i­ty. Im­me­di­ate ex­pla­na­tions for these bro­ken promis­es, such as liq­uid­i­ty con­straints, fall short, as pro­grams that pro­vide fam­i­lies with cash on hands of­ten fail to in­crease in­vest­ments in chil­dren. Rather, present-bias – the ten­den­cy of think­ing that one will (or of wish­ing they would) be more pa­tient in the fu­ture – is the lead­ing ex­pla­na­tion for bro­ken promis­es in gen­er­al and for un­der-in­vest­ment in chil­dren in par­tic­u­lar. The rea­son is that present-bi­ased in­di­vid­u­als make am­bi­tious plans, count­ing on their fu­ture selves to ful­fil those plans, only to frus­trate them when the fu­ture be­comes present.

In this project, we study al­ter­na­tive rea­sons for such bro­ken promis­es, linked to an asym­me­try in how par­ents treat the fu­ture when it comes to them­selves and their chil­dren. In a lab-in-the-field ex­per­i­ment in Malawi in which par­ents had to share a fixed amount of peanuts with one of their chil­dren over dif­fer­ent time hori­zons, we no­ticed that par­ents sys­tem­at­i­cal­ly think they will be more gen­er­ous to­wards their chil­dren the fur­ther in the fu­ture con­sump­tion is. How­ev­er, when we re­vis­it those par­ents only two days lat­er, they re­nege on those plans, even be­fore the fu­ture be­comes present. We call this phe­nom­e­non par­ent-bias.

We show that par­ent-bi­ased re­al­lo­ca­tions are both com­mon and large. Strik­ing­ly, de­spite am­bi­tious plans, par­ent-bi­ased in­di­vid­u­als ac­tu­al­ly al­lo­cate less to their chil­dren in the present. More­over, out­side the lab, we doc­u­ment that par­ent-bi­ased in­di­vid­u­als also in­vest sig­nif­i­cant­ly less in their chil­dren’s health and ed­u­ca­tion rel­a­tive to oth­er par­ents, even hold­ing con­stant the ex­tent to which they care about their chil­dren’s fu­ture.

We also test dif­fer­ent mech­a­nisms with the po­ten­tial to mit­i­gate par­ent bias: re­mind­ing par­ents of their pre­vi­ous plans by the time we re­vis­it them and of­fer­ing them the op­por­tu­ni­ty to com­mit to their orig­i­nal plans. Dis­ap­point­ing­ly, fram­ing al­lo­ca­tion de­ci­sions does lit­tle to mit­i­gate re­al­lo­ca­tions, and par­ent-bi­ased sub­jects ac­tu­al­ly de­mand com­mit­ment to a less­er ex­tent than oth­er par­ents.

The loop: Un­der-in­vest­ment in chil­dren’s health and ed­u­ca­tion.

Break­ing the loop: Doc­u­ment­ing a new mech­a­nism for why par­ents of­ten re­nege on promis­es to in­vest more in their chil­dren in the fu­ture in­forms the de­sign of new in­stru­ments – from school meal plans to ear­marked sav­ings ac­counts – with the po­ten­tial to in­crease those in­vest­ments.

Re­search Team

Guilherme Lichand

UZH

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Ernst Fehr

UZH

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Maite Deambrosi

UZH

Juliette Thibaud

Zurich Graduate School of Economics

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