The Schooling Decision: Family Preferences, Intergenerational Conflict, and Moral Hazard in the Brazilian Favelas

This paper experimentally analyzes the schooling decisions of poor households with adolescent children in urban Brazil. Parents in our study were being paid large monthly transfers by the local government conditional upon their children attending school. We elicit parents’ incentivized choices between such conditional monthly payments and guaranteed, unconditional monthly payments of varying relative sizes. In the baseline treatment, an overwhelming majority of parents prefer conditional transfers to larger unconditional transfers. However, parents reveal much weaker preferences for the conditionality if either (i) their child is not informed that the conditionality would be dropped or (ii) if parents are offered to receive free text-message notifications whenever their child misses school. These findings suggest important intergenerational conflicts in these schooling decisions and a lack of parental control and observability of school attendance. Further experimental treatments are consistent with parental preferences not just to keep the children in the classroom but also off the streets. JEL Classification: C92, D13, D19, D82, I21, J13, O12