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Title: Consequences of Interactions between Resident and Nonresident Kin

Citation Type: Miscellaneous

Publication Year: 2011

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Abstract: The terms “family” and “household” are used interchangeably in the literature. But do interactions between family members residing in separate households affect individual outcomes? I address this question by testing whether children’s human capital accu- mulation was affected by the earnings shocks of their nonresident kin during the 1997-8 financial crisis in Indonesia. The crisis produced sudden, heterogeneous changes in the real earnings of Indonesian workers, providing a natural experiment for conducting this test. Earnings shocks to children’s nonresident kin – including extended family and rel- atives living in other districts – significantly affected their human capital accumulation between 1997 and 2000. These effects were persistent. Results from 2007, nearly a decade after the crisis hit, indicate that the shocks affected children’s ultimate educational attain- ment. I explore several possible channels of causation and find evidence that intra-family transfers, underpinned by ex-post altruism as opposed to ex-ante insurance contracts, were important. Additional evidence highlights the role of family networks as a source of vulnerability to households reliant upon transfers to finance human capital investments. The results have implications for the design of surveys, as well as the targeting and eval- uation of policies aimed at improving educational outcomes and protecting individuals from the long-term consequences of economic shocks.

Url: https://pdfs.semanticscholar.org/871c/8dd8a8ae2a65b34817641827705efbc0fd06.pdf

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Authors: Karner, Paul

Publisher: Boston University

Data Collections: IPUMS USA

Topics: Family and Marriage

Countries: United States