Risk and schooling decisions in rural Madagascar: a panel data analysis

This paper explores the relationship between household income shocks in agriculture and school attendance in the context of rural Madagascar. The paper examines the possibility that parents obtain informal income insurance by letting their children work. This hypothesis is tested by examining the relationship between household income shocks and human capital investment in children.

In particular, the paper investigates whether children’s tendency to join school and to drop out of school responds to transient shocks. It also investigates issues such as gender and intra household resource allocation.

The paper finds that:

• transitory income affects children’s school dropout behaviours significantly but not school entrance. This result is consistent with the observation that children’s participation to household chores and agricultural activities increases with age
• the probability of school entrance appears to be sensitive to shocks in the demographic structure of the household since it is negatively correlated with the death or moving out of elderly household members
• parents in the sample favoured girls in terms of education
• there is weak evidence of resource competition among siblings.