How does intergenerational investment respond to changes in the marriage market? Evidence from China

Abstract

Abstract This paper examines how intergenerational investment responds to changes in the marriage market. Two major channels are modeled and empirically tested: first, expecting gender-specific impacts on the future marriage market for their children, parents adjustments in educational investment differ by the gender of children, and second, changes in marriage market conditions have contemporaneous impacts on intrahousehold bargaining because they change existing couples remarriage options, which affects their educational investment in their children. We test our model by exploiting a policy change in favor of local urban men in the urban marriage market in China. We find that educational investment by local-local couples decreases for sons but changes little for daughters. Consistent with the decrease in children s educational investment, female-favored consumption decreases while male-favored consumption increases. These results provide evidence of interaction between the intrahousehold bargaining and the future marriage prospect effects.