The schooling repayment hypothesis for private transfers: evidence from the PROGRESA/Oportunidades experiment

Abstract

The schooling repayment hypothesis for private transfers predicts a positive rela- tionship between the amount of parental investment in children's education and the amount that adult children transfer to their parents. This paper provides evidence on the repayment motive using data from the Mexican conditional cash transfer pro- gram PROGRESA/Oportunidades. The program pays a transfer to parents for sending their children to school. Thus, if private transfers from adult children to parents are in part repayment for parental schooling investments made in the past, then PRO- GRESA/Oportunidades should decrease these transfers, because parents were already exogenously compensated by the government for sending their kids to school and not to work. Exploiting the exogenous variation in the amount of cash transfers a household receives from the program for sending its children to school, we compare the private transfers received in 2007 by parental households who had children 0-16 in 1997 and started receiving the programs'bene…ts in 1998 with the transfers received by similar parental households who started receiving bene…ts in 1999. Our results suggest that (i) there exists a repayment motive and (ii) that PROGRESA/Oportunidades is causing adult children to transfer less resources to their parents.