Maternal relative income, bargaining power, and children's education expenditure

Abstract

This study presents a household bargaining model to theoretically examine the logical mechanisms by which maternal relative income influences children's education expenditure. The theoretical findings demonstrate that an increase in maternal relative income can enhance children's investment in education through both the income effect and bargaining effect. To validate the theoretical model, empirical tests are conducted using panel data from the China Family Panel Studies (CFPS) covering the period from 2010 to 2018. The findings demonstrate a significant and robust positive influence of maternal relative income on children's education expenditure, even after conducting rigorous robustness tests and addressing potential endogeneity issues. Heterogeneity analysis reveals that the increase in maternal relative income particularly benefits boys, younger children, and those with fewer siblings. Moreover, households residing in northern China and high-income households observe a more substantial rise in their children's education expenditure as a result of an increase in maternal relative income. Mechanism tests indicate that the impact of maternal relative income on children's education expenditure primarily stems from both the income effect and bargaining effect.