Aspirations, Human Capital Investment, and the Intergenerational Transmission of Poverty in Indonesia

Abstract

This study investigates the effect of parental aspirations gap on children's educational attainment between 2007 and 2014, using two waves of Indonesian Family Life Survey data. The aspirations gap is measured by the difference between one's future reference point and his or her current life evaluation reported by each household head and spouse. The results show that boys whose fathers report a moderate level of the aspirations gap achieve substantially longer schooling years than the mean level of their same age cohort. Furthermore, the relationship is found to be inversely U-shaped, implying that an excessive aspirations gap discourages investment in children's human capital. An increasing aspirations gap of parents is also found to impede the educational attainment of children in poor families, which are more vulnerable to shocks that are found to increase the gap. Overall, the results of this paper shed light on the role of parental aspirations gap in the link between socioeconomic status of family and educational outcomes of children in Indonesia, where the gap of the poor is found to increase faster than the rich.