Ability and Intrahousehold Allocation in Gansu Province, China

This paper analyzes the strategies employed by households in rural China to allo- cate educational expenditure to children of dierent endowment, examining whether parents use educational funding to reinforce or compensate for variation in endow- ment. Employing climatic shocks as an instrument for children's endowment yields results indicating that parental expenditure is preferentially directed to children of lower endowment. This result appears robust to the potentially confounding effects of gender and grade level and holds across a number of measures of expenditure. This analysis is consistent with a hypothesis that parents use the allocation of household resources to compensate for differences in endowment among their children.