Household decision-making, empowerment and risk attitudes in Indonesia

Abstract

This thesis consists of three self-contained yet interrelated studies in household economics. All the studies in this thesis are based on the Indonesia Family Life Survey data set. The first study examines the impact of positive income shock, which is conditional cash transfer (CCT) programs, on frivolous consumption among the poor households. This study combines propensity score matching (PSM) and difference-in-differences (DID) strategy to estimate the average treatment effect on the treated (ATET) of the CCT programs. The results detect declining consumption on frivolous goods by the program participation. This finding potentially comes from the enforcement to education conditionality as the beneficiary households are found to increase expenditure in education-related goods. The second study investigates the role of mothers’ bargaining power on children health outcome. Using instrumental variables (IVs) approach, not only using individual and community attributes but also this study accounts for cultural aspect, namely patrilocality degree for ethnic group, to determine a direct measure of women’ bargaining power in the household. This study finds that mothers with higher bargaining power improve long term measure of child health status as indicated by higher height-for-age z-scores (HAZ) and lower prevalence of stunting. Further analysis reveals that only boys seem to enjoy the benefit of greater bargaining power of the mother while girls do not. The third study discusses whether and to what extent risk preferences of the parents, especially the household head, influence education outcome of the children as measured by child cognition. This study adds to the existing literature by providing supportive evidence of an inverse link between parental risk aversion and child cognitive ability in the developing country context. This finding indicates that education is deemed a risky investment. Further investigation exposes that girls are more sensitive toward risk-averse parents rather than boys in terms of education outcome, especially in matrilocal communities.