Association for Public Policy Analysis & Management

With the absence of proper credit markets and universal retirement security, parents in developing countries are incentivized to invest in children as means of old age support. It has been seen in the literature that transfer from children and well-being of the parents depends on the educational quality of the children. These two factors combined, provide incentive for the parents to invest in their child’s education apart from altruistic reasons. In developing countries like India, investment in a son generates higher return to the parents as compared to their daughter. This could be attributed to general labor market returns and marriage laws. This skewedness of dependency towards the son can be one of the reasons for the unequal investment between a boy and a girl child. In this paper, I will try and empirically establish the old age security motive for the parents as a potential reason for gender gaps in educational investment and outcomes.

Gender gaps favoring the male child at the household level in various aspects such as health and education are systematically higher in developing countries. In India, some of the established reasons for these gaps include patriarchal society, son preference, poverty, illiteracy, marriage laws and employment opportunities for women, but there has been no empirical work on the old age security motive.

I use the New Pension Scheme reform in India as a quasi-experiment to identify the causality between post retirement security of the parents and gender gap in educational investment and outcomes of the children. In 2004, the Government of India introduced the New Pension Scheme for its public sector employees joining after January 1^st, 2004. The public sector employees prior to that were enrolled in the Civil Servant Pension Scheme. This shift from the old Civil Servant Pension Scheme to the New Pension Scheme was seen as a decrease in the post retirement security by the public sector employees. The Policy change had no effect on the private sector employees. We use this policy change in a triple difference framework (Work Sector, Gender and Time) to capture the effect of decrease in post-retirement security on gender gap in investment. 

We use panel data from the Indian Human Development Survey. The major outcomes we look at, for investment in children are the schooling choices and test scores. While schooling choice between public versus private school is indicative of direct monetary investment in the child, test scores reflect the sum total of investments made in the child. I find that with the decrease in post-retirement security for the parents the gender gap against the female child increases. Compared to the male child a girl child is less likely to be enrolled in a private school or a school where the medium of instruction is English, both these effects are statistically significant. I find that the girl child has lower test scores compared to the boy child, however these results are not statistically significant. I also ran pre-trends and falsification tests which further supports our identifying assumptions.