Working Paper: CEPR ID: DP8529
Authors: V. Bhaskar; Ed Hopkins
Abstract: We study the incentives of parents to invest in their children when these investments improve their marriage prospects, in a frictionless marriage market with non-transferable utility. Stochastic returns to investment eliminate the multiplicity of equilibria that plagues models with deterministic returns, and ensure that a unique equilibrium often exists. Equilibrium investment is efficient when there is complete symmetry between the sexes. However, when there is any asymmetry between the sexes, including an unbalanced sex ratio, investments are generically excessively relative to Pareto-efficiency. Our model can be used for examine several implications of gender differences. For example, if shocks are more variable for boys than for girls, girls will invest more than boys. If there is an excess of boys, then there is parental over-investment in boys and under-investment in girls, and total investment will be excessive.
Keywords: assortative matching; tournament; ex ante investments; gender differences; marriage; sex ratio
JEL Codes: C72; C78; D62; H31; J12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Parental investments in children (J13) | Improved marriage prospects (J12) |
| Stochastic returns to investment (G11) | Improved marriage prospects (J12) |
| Asymmetry in sex ratio (J16) | Excessive investments in children (J13) |
| Shocks to investment returns (more variable for boys) (G11) | Gender disparities in investment levels (G59) |
| Gender differences (J16) | Parental investment behavior (D15) |
| Investment decisions (G11) | Efficiency of investments (G11) |