Risk Preference And Child Learning Outcomes: A Study On Ghana

Abstract

Although human capital investment increases the success rate of labour market participation and offers future welfare security for parents, empirical studies have established that it is a risky venture. Consequently, the risk preference of funders is pivotal in determining the optimal allocation of household’s scarce resources in educational investment. However, several studies that focused on improving education in Africa failed to consider the role of parental risk preference in achieving quality and equitable Education for all children, which is key to bridging the literacy and numeracy skills gap that exist in Africa. Against this backdrop, we leveraged the seventh round of Ghana Living Standard Survey data to explore the relationship between parental risk preference and child learning outcomes. The instrumental variable estimation technique was employed to solve the endogeneity problem associated with the two variables. We found that parental risk preference is a significant determinant of learning outcomes of children in Ghana given that children from risk loving homes have better learning outcomes. In addition, risk loving homes have better learning outcomes for girls and children in public schools. Further, children from risk-loving female headed households have better learning outcomes compared to children from risk-loving male headed households. Finally, risk loving household heads spend more on the education of their children than risk averse household heads. We therefore recommend that policy makers stakeholders need to implement programs induce risk loving attitudes in parents.