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Diversification of Human Capital Investments in Rural Ethiopia

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  • Annika Lindskog

    (University of Gothenburg)

Abstract

We investigate household-level diversification of human capital investments in a rural developing country setting. Returns to schooling and to the alternative, which includes acquisition of traditional agrarian knowledge, are uncertain. The theoretical model combines a portfolio-choice model with a human capital investment model. Diversification implies a negative relationship between education of the younger and the older sibling. Diversification is more important in more risk-averse households, and we use the interaction between sibling dependency in education and risk preferences to empirically test for diversification. Moreover, diversification is less important in credit-constrained households. The empirical analysis employs data on school entry of boys and girls in the rural Amhara region of Ethiopia. The results suggest diversification across brothers in households that are less credit-constrained.

Suggested Citation

  • Annika Lindskog, 2018. "Diversification of Human Capital Investments in Rural Ethiopia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(4), pages 676-692, September.
    • Handle: RePEc:pal:eurjdr:v:30:y:2018:i:4:d:10.1057_s41287-017-0099-y
    DOI: 10.1057/s41287-017-0099-y
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    Cited by:

    1. Heather Congdon Fors & Annika Lindskog, 2023. "Within‐family inequalities in human capital accumulation in India," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 3-28, February.

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    More about this item

    Keywords

    demand for schooling; human capital; uncertainty; risky investment; diversification; traditional education;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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