Can Policy Crowd out Culture?

Natalie Bau (University of Toronto)

Abstract: Policies change the economic environment, changing the incentives that allow cultural practices to persist. Since these practices can play multiple roles in society, policies can have unintended consequences. In this paper, I study kinship traditions that determine whether boys or girls support their parents in their old age in Indonesia and Ghana. I hypothesize that these traditions play the dual role of increasing old age support while incentivizing parents to invest in their children’s education. Both across and within-countries, parents invest more in the human capital of the child who, according to these practices, is more likely to care for them in old age. In both countries, the entry and expansion of pension plans reduces education for these children, and crowds out the practice of the traditions themselves. Thus, policy leads to cultural change.

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