Parental Decision-Making and Educational Investments: The Intergenerational Cost of Noncooperation

Spouses not matched in preference and decision-making power may make inefficient household decisions that may have long-term implications. In this paper, we conduct a series of lab-in-the-field experiments with parents to test whether mothers avoid bargaining with their more powerful spouses, thereby sacrificing the ability to finance expensive educational inputs through income pooling. We asked mothers and fathers to allocate money between a cash payout and a voucher double the value of the cash payout for children’s school materials, either individually or jointly with their spouse. We randomly varied how much couples could gain by deciding jointly on the allocation. We find that parents strategically react to higher levels of the treatment by cooperating more, but mothers in particular are more likely to avoid bargaining and sacrifice voucher value. We show that these results are driven by mothers with low empowerment, who believe their spouses disagree with their preferred allocations. After the redemption of the voucher for school materials, children of noncooperative parents achieve significantly lower test scores, suggesting a negative intergenerational externality of parents’ decisions.