Strategic Parental Investments in a Competitive Marriage Market

Abstract

Marriage market competition, coupled with imperfect commitment to intra-household resource sharing, may distort parental investments composition. When sex ratio is male-biased, parents of boys will overinvest in housing, potentially crowding out human capital investment. We examine the effect of more male-biased local sex ratio upon investments in boys relative to girls, using nationally representative Chinese data and a novel instrument to overcome the usual difficulty that sex ratios are related to unobserved son preference. Parents with boys increase labor supply and migrate to improve investments. They strategically respond to the sex ratio imbalance, increasing housing investment while reducing educational investment.

Keywords: Premarital investments, Sex ratio imbalance, Housing investment, Educational investment, Human capital development