Child Fostering and Human Capital Formation in KwaZulu-Natal: An Economist's Perspective

Abstract

Twenty-two percent of all African children under eighteen years old in KwaZulu-Natal are fostered children. This paper first describes how economists typically analyze the institution of child fostering. Next, a standard economic model of child fostering (by Zimmerman) is modified to better allow for the possibility of the under-provision of human capital inputs to fostered children. Taking advantage of panel data from the KwaZulu-Natal Income Dynamics Study (KIDS), a preferred measure of human capital accumulation is constructed and used to re-examine the impact of child fostering on educational investments. Similar to Zimmerman, there is little evidence of a “Cinderella” effect for those fostered to close relatives. However, evidence here casts doubt on any sustained negative impact for those fostered to distant relatives, despite verifying lower 1993 enrollment rates for these children. Additionally, initial evidence does not support the strong migration effect posited by Zimmerman. Some potential pitfalls to this new approach are also discussed.