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

Abstract

To assess the conventional view that assets uniformly improve childhood development through wealth effects, this paper tests whether different types of assets have different effects on child education. The analysis indicates that household durables and housing quality have the expected positive effects, but agricultural assets have adverse effects on highest grade completed and no effects on exam performance. Extending the standard agricultural-household model by explicitly including child labor, the study uses three waves of panel data from Tanzania to estimate the effects of household assets on child education. The analysis corrects for the endogeneity of assets and uses a Hausman-Taylor instrumental variable panel data estimator to identify the effects of time-invariant observables and more efficiently control for time-invariant unobservables. The negative effect of agricultural assets is more pronounced among rural children and children from farming households, presumably due to the higher opportunity cost of their schooling.