Parental risk attitudes and child cognitive outcome in Indonesia

ABSTRACT

The empirical link between children's cognitive ability and parental risk attitudes has been understudied. Specifically, an individual’s educational outcome may reflect the decisions made on their behalf by parents, reflecting their risk attitudes. This paper aims to fill gaps in the existing literature by investigating whether parental risk preferences influence the cognitive ability of children in Indonesia. Using a dataset from the fifth wave of the Indonesia Family Life Survey (IFLS-5), we find an inverse relation between parental risk aversion and children’s cognitive test scores. However, the effect of parental risk attitudes is only prominent for daughters.

KEYWORDS:

• Risk attitude
• cognitive ability
• education
• Indonesia

Acknowledgement

This paper formed part of Hartarto's PhD thesis at Heriot-Watt University. The paper has benefited from comments by participants at several conferences and workshops as well as support for Hartarto from Universitas Muhammadiyah Yogyakarta, the Global Challenges Research Fund and the Scottish Funding Council. The many constructive comments by two anonymous reviewers and the Editor helped us improve the paper substantially – their contribution is gratefully acknowledged. The authors wish to thank Christopher Aitken, Paul Allanson, Atanas Christev, Philippe LeMay-Boucher, Sarmistha Pal, Catherine Porter, Sailesh Tiwari, and Patricio Valdivieso for their comments and suggestions at different stages of this work. The usual disclaimers apply.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Household Survey Data (Susenas), 2015.

2 Statistically significant at 1% level using t-test.

3 We thank an anonymous reviewer for encouraging us to consider this important issue.

4 Note that the sample of households used in our study comprises families where both parents are alive. In the data, the head of household is found to be the father in all cases. This is related to cultural norms in Indonesia.

Additional information

Funding

This study was funded under PhD Studentship from School of Social Sciences, Heriot-Watt University, and partially financed by Universitas Muhammadiyah Yogyakarta.