Intra-household differences in education and home leaving in Indonesia.

Publication: ASEAN Economic Bulletin

Publication Date: 01-APR-06

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COPYRIGHT 2006 Institute of Southeast Asian Studies (ISEAS)

I. Introduction

When a daughter leaves her parents to set up a new household with her husband, or a son sets out to other villages to find better employment opportunities, the parents as well as the child may lose some of the benefits associated with living in a joint household. For instance, the ability to pool resources and to share consumption may diminish as the child ceases to contribute directly to household production. If the departing child also has some claims on the parents' assets, for instance through inheritance, the household may lose not only a potential source of family labour, but also some of the capital used in household production. These are only a few reasons why the process of home leaving is not only a very important life-course event for a young adult but it also has important consequences to the households.

The age at which young people leave and the reasons why they leave vary across societies. Often, home leaving coincides with other life-course events such as completion of schooling, marriage, or entry into the labour market. In some societies, marriage may be the most important route to leave home. In others, employment opportunities may be the most important reason why young people leave their original households. Even within the same society we see variation in the pattern of home leaving with respect to age, sex, reasons to leave, as well as destinations.

Empirical studies on home leaving in developing countries have looked at how various individual and parental characteristics influence the decisions to leave home (see, for example, Johnson and DaVanzo 1998). This paper attempts to add insights to the literature by looking at how differences in characteristics (for example, education) between household members may influence the probability of home leaving. Individuals living in households in which there is a large difference associated with heterogeneity of preferences may have higher propensity to leave. This paper looks at home leaving of young adults in Indonesia from this point of view. The paper borrows the model of household division developed by Foster and Rosenzweig (2002) in which, within the framework of a collective household model, disagreement about household public goods among household members leads to members leaving the household. (1) In particular, this paper focuses on how intra-household differences in education influence home leaving.

As discussed by Foster (1993) and Johnson and DaVanzo (1998) among others, if home leaving in a society occurs solely because of marriage, one could study the age of first marriage to be able to predict this event. But home leaving often is a much more complex process and does seem to vary between and even within societies. For instance, it is common in some parts of Indonesia for a young married couple to live with either set of parents "until they are considered to be able to manage their own affairs..." (Koentjaraningrat 1985, p. 133). Anthropological as well as demographic studies on Indonesia have long concluded that there is no strong cultural preference regarding with whom a newly married couple resides (Geertz 1961, p. 76; Jay 1969, pp. 40-41, Koentjaraningrat 1985, p. 133; see also Jones 1994, p. 113). (2) Household strategy to reduce consumption variability may explain the link between marriage and migration pattern, such as the case in rural India studied by Rosenzweig and Stark (1989). Employment is the primary motive of young male adults in Malaysia who leave the households (Smith and Thomas 1998; Johnson and DaVanzo 1998), while moves of young women are more related to fertility and family considerations (Smith and Thomas 1998). (3) Changes in household structure do not only take place in anticipation of economic shocks; it can also occur as a result of these shocks. For instance, Frankenberg, Smith, and Thomas (2003) find that households in Indonesia reorganize their composition and living arrangement to cope with economic crises. In short, changes in household structure are likely to be responsive to economic incentives. This implies that decisions underlying it are likely to be endogenous with a number of household economic outcomes.

While the importance of understanding the underlying process of how household composition changes seems obvious, there are still few studies that try to explicitly model how households divide. (4) One notable exception is the study by Foster and Rosenzweig (2002) in the context of Indian rural households. They model household division explicitly and investigate how exogenous income growth interacts with household structure and intra-household inequality to influence decisions on joint residence.

This paper attempts to apply the model developed by Foster and Rosenzweig (2002) to the Indonesian context as a first step towards understanding the nature of household division. It is appealing to choose Indonesia as a study case because Indonesia is a diverse society with different traditions and norms influencing decisions on household structure and living arrangement. However, it is important to emphasize that this paper by no means argue that intra-household differences in education is the only determinant of household division.

Focusing on two waves of the Indonesia Family Life Survey (1993 and 2000), I estimate the determinants of household division (defined as the event when a young adult leaves the household) by using origin-household variables as explanatory variables in a probit regression framework. Using 1993 as the initial period, I estimate the probability that a household has divided by the year 2000. (5) The findings suggest that, consistent with the model, the probability of household division increases with the number of claimants in the household (household size). Higher education of the head seems to be associated with lower probability of household division. On the other hand, higher maximum years of education of non-head members seem to be associated with higher probability of household division. While one could explain this finding in terms of the collective household model, one could also interpret the finding to be largely related to the migration of young household members, which can very well be explained within the context of unitary household model. (6) The result also shows that standard deviation of the household member's education, used as a measure for the intra-household inequality, helps explain the probability of household division. However, high correlation between different measures of education makes it difficult to estimate and interpret the effects of education variables. Land and assets are not important in determining household division. Controlling for household head's education and age, as well as the age composition of household members, households with female heads tend to have higher propensity to divide, especially in rural areas.

The paper is organized as follows. The next section will briefly discuss the related literature with some emphasis on studies done on Indonesia. Section III will provide the outline of the model proposed by Foster and Rosenzweig (2002) with the goal of motivating the empirical specification used in this paper. I will then discuss the institutional setting in Indonesia in section IV. Section V will provide the descriptive analysis, which is then followed by our multivariate analysis in section VI. I discuss the limitation of the paper and conclude in section VII.

II. Related Literature on Household Division

While the advantages of having longitudinal data are obvious, the question of how one defines a household--not unambiguous even in cross-sectional setting--becomes increasingly important. First, there is the question of whether it is more appropriate to focus on household as the decision-making unit or to treat household as a collection of individual decision makers, a question that is at the centre of the literature on intra-household allocations. (7) As discussed by Strauss and Thomas (1995), the question of appropriateness is an empirical one, and the answer really depends on the issue at hand. Although in some cases it may be more appropriate to put the locus of decision making on individuals, in other cases household decisions may be made at the household level, or even at a higher level such as the extended family. Secondly, as discussed above, the household itself is a dynamic concept: household structure and composition changes over time.

One of the few studies that focus on household division is a study by Foster (1993) in Bangladesh. The study focuses on the institution of bari, a collection of related households living in a large compound. Foster uses the data on the characteristics of households in 1974 and matches them with the data from 1982 to identify households that are partitioned and to see whether there are effects of household partition on household outcomes such as child's schooling. While the study does provide some evidence of the effects of household partition on household outcome, it does not model household partition explicitly.

A more recent study by Foster and Rosenzweig (2002) explicitly models household division. In the context of rural Indian households at the beginning of the "Green Revolution", they develop a model of household division to study how exogenous income growth interacts with household structure and intra-household inequality to affect household division. They find that estimates of the extent to which households are better off due to technical change in agriculture are overestimated when household division is treated as exogenous. (8) Rosenzweig (2003) adopts a similar approach to study economic mobility in Bangladesh, taking into account the selection problem caused by non-random household division. He finds that the effects of maximum education of adults in the origin-household, when the individuals were young, on individuals' educational attainment and earnings in later years are understated, and the effects of origin-households income are overstated, when one only looks at adult males in households that were undivided compared with using a sample of all adult males. (9)

On Indonesia, there have been a number of related studies on household living arrangement. Cameron (2000) studies the residence decision of elderly Indonesian, using the 1993 wave of the IFLS. She finds that children's and parent's demographic characteristics play an important role in the residency decision. Cameron and CobbClark (2001) look at determinants of co-residency, financial transfers, and the labour supply of the elderly in Indonesia. They find that the characteristics of the elderly parents' children play a more important role than the characteristics of the parents themselves. A more recent study by Frankenberg, Chan, and Ofstedal (2002) focuses on the stability and change in living arrangement using...

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