Cohabitation is a common practice in eastern Indonesia due to the high cost of marriage. There are studies in the literature that investigate the impact of cohabitation. However, there is limited study on the impact of cohabitation on child development and the mechanism of the impact. This study analyzes the effect of cohabitation on households’ human capital investment on education, which is an important determinant of a child’s future outcome. We use an instrumental variable approach—with the gender of the child before marriage as the instrument—to identify the causal effect of cohabitation on household investment on education and child cognitive skill using a unique dataset provided by the 2012 Indonesian Family Life Survey East. We find that cohabitation led to a lower child’s cognitive score by 0.288 standard deviations. One of the main explanations for this result is that cohabited couple spent a lower share of education to total expenditure. In particular, cohabiting couples allocated a lower share of education to total expenditure by 4.4 percentage points in comparison to married couples. Therefore, cohabitation has a negative impact on child cognitive scores and it can be explained by, among others, relatively lower education spending. We also discuss some policy implications from our findings.

Download the paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3955803

Speaker: Arif Anindita (Università degli Studi dell’Insubria, Italy)

Tuesday, 30 November 2021 at 14.00-15.30 WIB

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Thumbnail photo by Ben Richardson on Unsplash