Multidimensional Pre-Marital Investments with Imperfect Commitment

Abstract

We analyze a model of multidimensional parental investments under imperfect marital commitment. Parents choose to invest in their child's human capital and in housing, which is a public good within marriage. If men are in excess supply in the marriage market, but also enjoy greater bargaining power within marriage, their parents will overinvest in housing to credibly commit to share more resources with potential wives. This may crowd out human capital investment. To test the theory, we use nationally representative Chinese household survey data to examine the effect of a more male-biased local sex ratio upon investments in boys, relative to investments in girls.Parents with boys increase labor supply and migrate more to improve earnings and investments. They increase housing investment while reduce educational investments.

Keywords: human capital development, Human capital investment, Imperfect commitment, Premarital investment, Public Goods, Sex-ratio imbalances

JEL Classification: D10, J12, J13, J16, J18, J24, J61, O15