Wednesday, November 30, 2016
4 p.m. – 5:30 p.m.
McKinney Conference Room
Policies may change the returns to transmitting cultural norms to the next generation, unintentionally changing cultural practices. I study cultural norms that determine which children support their parents in their old age in Indonesia and Ghana. Consistent with a model where these norms play the dual role of increasing old age support and ameliorating incomplete contracting problems between parents and children, parents invest more in the human capital of the children who are more likely to care for them in old age. In both Indonesia and Ghana, the entry and expansion of pension plans crowds out human capital investment in the children targeted by the norms. Moreover, consistent with a model where transmission of the norm is costly and parents choose how much to invest in transmitting the norm to their children, the pension plans also crowd out the practice of the norms. Thus, policy crowds out culture.
Natalie Bau is an assistant professor in the Department of Economics at the University of Toronto.
Download her paper here.