How did you become interested in the link between health economics and household economics?

I have a deep interest in human behaviours, including economic behaviours within households. Despite their prominence and prevalence, many household economic behaviours are not well understood by economists. At the Institute, I conducted applied microeconomic study during my PhD programme, and my research field covered health economics and household economics.

My PhD thesis thus consists of three essays in the field. The first one, “Homophobia and the HIV/AIDS Epidemic: Evidence from China” analyses the two-way causality between the HIV epidemic and individual attitudes toward homosexuality. Using pharmaceutical sales data, the second essay, “Product Patents and Access to Innovative Medicines in a post-TRIPS Era” (joint with Jayashree Watal), studies how patents policy affects the speed of launch of new medicines and the degree to which pharmaceutical firms adjust the prices of their products to local income levels. As for the third essay, the one I’ve chosen to speak about here, “In Exchange for Nothing: Marriage Payments and Old-Age Support in China”, it focuses on parental support for children’s marriage payments in China.

China is one of a few societies where marriage payments include both bride prices and dowries, and the value of these payments (including cash and housing assets) can be as large as seven times annual household income in rural areas (Yan 2005). Despite the economic burden, many Chinese parents choose to finance their children’s marriage payments. According to the China Health and Retirement Longitudinal Study (CHARLS), around 65 percent of married sons and 40 percent of married daughters of CHARLS respondents received parental support for their marriage payments. Given the large value of marriage payments and the prevalence of parental support, it seemed is important to understand the motive for and the outcomes of this intergenerational transfer behaviour. 

Can you describe your thesis questions and methodology?

Yan (2005) explains that “the most common strategy of parental investment in old-age security is to provide the largest possible size of bridewealth because the younger generation regards the value of bridewealth as the most important marker of parental support”. Based on this hypothesis of exchange motive, I frame my research questions and construct my empirical model. 
I pose two questions:

(1) Household allocation: What are the factors to consider for parents to offer marriage payments to their children? 
I consider parental resources, characteristics of children, and socio-demographics such as sex ratio in my analysis. In particular, as previous literature has found that increases in maternal income are more relevant than paternal income to children’s outcome (Duflo 2000; Thomas 1990, 1994), I study the impact of maternal and paternal resources separately.

(2) Motive: Do parents offer marriage payments to children in exchange for the provision of old-age support from children in the future?
For households with multiple married children, I investigate whether children who received marriage payments from parents would provide parents with more old-age support than their non-recipient siblings do. If it is true, I can conclude that offering marriage payments to children involves the exchange motive; if not, parental altruism should be valid. 

This study is of considerable economic importance. I regard parental support for children’s marriage payments as non-human capital investment in children (Becker 1993). As children are considered the major providers of old-age care of their parents in developing countries, it is important to investigate (i) the degree to which parents will receive old-age support from children in return for their previous parental investment and (ii) what type of investment that parents make can benefit themselves most.

Regarding methodology, I engage in both theoretical modelling and empirical examination. My empirical study relies on CHARLS 2014, 2015 household survey data, in which I use the value of intergenerational transfers to indicate old-age support.

What are your major findings?

First, as mothers become senior at their job, their children, especially daughters, are more likely to receive marriage payments. However, the fathers’ working experience does not affect the chance of offering marriage payments to children. 

Second, rural men and men who marry at a young age are much more likely to have parental support for their bride prices. The value of bride prices is found inflated as local male-to-female sex ratio raises.

Third, compared to their non-recipient siblings, children who received marriage payments in the past do not currently make more transfers to parents after controlling for their income and education, which rejects the exchange motive for giving marriage payments to children. 

Last, despite no evidence that non-human capital investment in children leads to repayment to parents, children do reward their parents for their human capital investment. Better-educated and higher-income children make more net transfers to parents. 

What are the social implications of these findings?

I see three implications. First, parental support for children’s marriage payments is an inter-generational asset transfer, rather than an investment in parents’ own old-age security. Second, in order to receive more old-age support from children, parents should invest in the human capital of their children (e.g. education and nutrition) in their early years, rather than in asset transfers in their adulthood. Third, financial dependence on parents is a lasting one for children: compared to their non-recipient married siblings, marriage payments recipient children continue to receive more financial support from parents in the later period.

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Rong Dai defended her PhD thesis in Development Economics in December 2019. Associate Professor Martina Viarengo presided the committee, which included Professor Jean-Louis Arcand, thesis director, and Jeremy A. Lauer, then Economist at the Department of Health Systems Governance and Financing of the World Health Organization, Geneva, currently Professor and Director of Research at the University of Strathclyde, Glasgow. 

Full citation of the PhD thesis:
Dai, Rong. “Three Essays in Development Economics.” PhD thesis, Graduate Institute of International and Development Studies, Geneva, 2020.

Good to know: members of the Graduate Institute can download Dr Lee’s PhD thesis via this page of the Institute’s repository.

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Interview by Nathalie Tanner, Research Office.
Banner picture: excerpt from an image by gary yim/Shutterstock.com.