Liquidity constraints, uncertain parental income and human capital accumulation

Abstract

This note analyses the effect of parental income variability on investments in education when capital markets are imperfect. Our empirical results show that educational choices might act as a buffer choice when the environment is uncertain.

Keywords:

• schooling decisions
• uncertainty
• liquidity constraints
• developing countries

JET Classification:

• E2
• I2
• O1
• R2

Notes

¹ We also estimated simple Probit models for school attendance obtaining results consistent with those of the Tobit model.

² In each wave, each household is asked whether they experienced any crop loss during the previous 6 months. If the answer is yes, they are also asked the monetary value of the loss.