Do Different Types of Assets Have Differential Effects on Child Education? Evidence from Tanzania

Kashi Kafle,Alex E. Winter-Nelson,Dean Jolliffe

doi:10.2139/ssrn.3097331

Abstract

This analysis is motivated by recognition that anti-poverty interventions often affect both the level and composition of assets held by beneficiaries. To assess the conventional view that assets uniformly improve childhood development through wealth effects, we use three waves of panel data from Tanzania and test whether different types of assets have differential effects on children's educational outcomes. Our results indicate that household durables and housing quality have positive effects, but agricultural assets have adverse effects on children's highest grade completed and exam performances. We use a Hausman-Taylor instrumental variable (HTIV) panel data estimator to identify the effects of both time-varying and time-invariant endogenous variables. We find that the negative effect of agricultural assets is driven by large agricultural equipment and livestock ownership and the negative effect is more pronounced among rural children, poor children, and children from farming households, presumably due to the higher opportunity cost of schooling.

Highlights

While poverty is typically defined by whether someone has sufficient daily income or consumption to meet basic needs, many development organizations view wealth creation through asset ownership as the pathway out of poverty
We have shown that agricultural assets have adverse effects on the highest grade completed but no effect on children’s test performance in our data
This implies that agricultural assets may increase the opportunity cost of schooling but the increment may not be homogenous among all children in the same household

Summary

Introduction

While poverty is typically defined by whether someone has sufficient daily income or consumption to meet basic needs, many development organizations view wealth creation through asset ownership as the pathway out of poverty. 2. Theoretical model and results While the hypothesis that different types of assets can have differential effects on child education is intuitively appealing and empirically testable, there has been significantly less consideration of the theory of this relationship. We explicitly assume that child labor adversely affects children's educational outcomes and examine the asset-child labor relationship, drawing from the agricultural household models described in Singh et al (1986). Differentiating expressions i.) and ii.) with respect to income y gives us the following conditions: This indicates that an exogenous increase in income or assets unambiguously reduces child labor and increases consumption when the labor market is perfect. The results imply that, when the labor market functions perfectly, the income effect on child labor is always negative, but the effect of owning assets depends on the type of assets. When no labor market exists and households have to make production and consumption decisions simultaneously, non-labor income and educationspecific assets still have clearly discernible effects on child labor and consumption, but the effects of assets used in agricultural production are harder to understand because they are more complicated

Method and Data

Econometric model

Summary statistics

Conclusion