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This paper evaluates the strategies employed by households in rural China to allocate educational expenditure to children of different physical endowments, examining whether parents use educational funding to reinforce or compensate for these differences. Climatic shocks are employed as an instrument for endowment, measured as height-for-age, allowing for the identification of the impact of quasi-exogenous variation in endowment on parental allocations conditional on household fixed effects. The results suggest that educational expenditure is directed to the relatively weaker child; in response to the mean differences in height-for-age be- tween siblings, parents redirect around 25% of discretionary educational spending to the child with lower height-for-age, and this effect is robust to the potentially confounding effects of gender and birth order. There is some evidence that time allocation may also be a relevant margin of compensation, but no evidence that medical expenditure responds to differences in height-for-age.
Date Posted: 18 April 2016
This document has been peer reviewed.