DP8885 Sons or Daughters? Endogenous Sex Preferences and the Reversal of the Gender Educational Gap
This paper provides a new explanation for the narrowing and reversal of the gender education gap. It highlights the indirect effect of returns to human capital on parents' preferences for sons and the resulting demand for children and education. We assume that parents maximize the full income of their children and that males have an additional income, independently of their level of education. This additional income has two effects. First, it biases parental preferences towards sons. Second, it implies that females have relative advantage in producing income through education. We show that when the relative returns to human capital are sufficiently low, the bias in parents' preferences towards sons is relatively high, so that parents who have daughters first have more children. Daughters are born to larger families and hence receive less education. As returns to human capital increase, gender differences in producing income diminish, parents' bias towards sons declines, variation in family size falls and the positive correlation between family size and the number of daughters is weakened. When returns to human capital are sufficiently high, the relative advantage of females in education dominates differences in family size, triggering the reversal in gender education gap.