Start What You Finish! Ex Ante Risk and Schooling Investments in the Presence of Dynamic Complementarities



Andrew Foster, George and Nancy Parker Professor of Economics, Brown University

Andrew Foster is the George and Nancy Parker Professor of Economics at Brown University. He has been active in the Population Studies and Training Center since he came to Brown over twenty years ago and served as PSTC Director from 2011-2016. He is an applied microeconomist and has worked on a wide variety of topics in the areas of health, population, and economic development.  His talk will focus on how income risk, coupled with intertemporal complementarities in the productivity of child study time, leads to low levels of schooling in low-income rural areas. The essence of the idea is that parents who are concerned that their child will not be able to complete a given level of schooling due to a future adverse shock may decide not to begin that level at all. This anticipation may lead to underinvestment even when, ex post, conditions are favorable. Testing for such an effect is complicated because household assessments of future risk are difficult to measure and change slowly over time. In addition to providing a framework for thinking about the ex ante risk effect, he and his coauthor Esther Gehrke, test for the presence of such an effect using a forty-year panel data set from rural India that Foster has helped to collect. To capture changes over time in risk for the empirical analysis, they use the fact that the consequences of rainfall for agricultural income have been reduced due to the expansion of groundwater irrigation in some areas. 

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