Sons or Daughters? Endogenous Sex Preferences and the Reversal of the Gender Educational Gap

This paper provides a new explanation for the long-run decline in fertility, the narrowing of the gender educational gap and its reversal, which has recently occurred in many countries. It highlights the indirect effect of technological progress on the bias in parents’ preferences for sons and the impact of this bias on the demand for children and their education. We extend a standard household decision model regarding the quantity and quality of its offspring along two dimensions. First, we explicitly allow parents to value daughters and sons differently. Second, we model fertility choice as a sequential process. It is assumed that males have relative advantage in physical labor tasks and females have relative advantage in mental labor tasks, which are associated with education. For a low technological level, returns to mental labor are low and returns to physical labor are relatively high, which implies a high gender wage gap. Consequently, bias in parents’ preferences towards sons is high, which implies that families with daughters are larger and left with less education. As technology progresses, the returns to mental labor increases, gender wage gap declines, fertility becomes less uncertain, causing households to choose smaller families. As a result, relative advantages of women in education becomes more important until it dominates differences in family sizes, which, ultimately, triggers the reversal in gender educational gap.