How dowry influences household decisions in rural India

It is widely believed that Indian parents start saving for dowry as soon as a daughter is born. In the second of a two-part series on dowry in rural India, this article examines how dowry influences household decision-making and intertemporal resource allocation. It shows that as expected dowry increases, families with firstborn girls increase savings – both overall and relative to families with firstborn boys

Bride-to-groom transfers at the time of marriage, or dowry, is an ancient custom that remains widely prevalent in contemporary developing societies such as India. Although the Dowry Prohibition Act, 1961 prohibits the giving or taking of dowry in India, according to the 2006 Rural Economic and Demographic Survey (REDS), dowry was paid in 95% marriages during 1960-2008. Dowry imposes a substantial burden on girls’ families as it can often amount to several years of household income.

It is widely believed that Indian parents start saving for dowry as soon as a daughter is born. Yet, there is no prior evidence on the magnitude of the impact of the institution of dowry on parents’ saving behaviour. In this article, we discuss how future dowry payments influence household decision-making and intertemporal resource allocation (Anukriti et al. 2020). We use data from the 2006 REDS on 17,000 marriages that took place during 1986-2007. This dataset is the most recent source of dowry information for India. We compute net dowry as the difference between the value of gifts given by the bride’s family to the groom or his family and the value of gifts given by the groom’s family to the bride’s family.

Comparing families that differ by firstborn sex and expected dowry

By definition, the dowry expense is higher for parents of a girl than parents of a boy. However, we cannot simply compare household savings after the birth of a girl relative to a boy since boy-families and girl-families are likely to differ along other dimensions that can influence savings¹. Instead, we compare households that differ by firstborn sex because: (a) Parents of a firstborn girl (FG) have more girls – and thus higher dowry burden – than parents of a firstborn boy (FB), due to the strong desire for sons² and (b) Firstborn sex is as-good-as-random in India³. To test if the differences between FG and FB families are due to dowry and not due to other factors, we test if the FG-FB difference is higher when expected dowry4 is higher.

Higher expected dowry increases current household savings

We find that the prospect of higher future dowry increases current savings. As expected dowry increases, FG families increase savings, both overall and relative to FB families. For the average level of expected dowry (Rs. 26,120), FG families save Rs. 1,613 more per capita each year than FB families. Back-of-the-envelope calculations suggest that an average household in our sample is able to save for the bulk of the wedding expenditure in advance.

The increased savings take the form of savings in financial institutions. Interestingly, savings in jewellery or precious metals – traditionally considered an integral part of dowry – do not increase several years in advance. These patterns are consistent with greater access to financial institutions and instruments in rural India, and the less liquid nature of jewellery relative to savings in bank accounts, in recent years.

Fathers work more to finance higher savings

We find that FG fathers work more days in a year, relative to FB fathers, as expected dowry burden goes up – suggesting that part of the increased savings is financed through higher income. We do not find any impact on mothers’ labour supply, which is not surprising given the low levels of female labour force participation in India (Klasen 2017).

Is dowry an underlying cause of son preference?

It is often claimed that dowry is an underlying cause of son preference and sex-selective abortions in India (Harris 1993, Das Gupta et al. 2003). However, this is inconsistent with the pattern of sex-selection that is observed in India. If dowry was a predominant cause of son preference, one would expect parents to always prefer a son over a daughter, irrespective of how many sons they have. However, data show that if parents have at least one son, their preferences are gender-neutral, casting doubt on the role of dowry in driving son preference. Consistent with this, we find greater sex-selection in FG relative to FB families even in the absence of dowry, and dowry is not an additional significant explanatory factor⁵.

Policy implications

Our findings emphasise the crucial role of traditional cultural institutions like dowry in determining economic behaviour. Parents in rural India work and save more towards dowry today, with payoff after several years. This suggests that unlike decision-making in similar domains where costs are incurred in the present, but returns are far out into the future, such as preventive healthcare, it may be easier for parents to overcome behavioural constraints when saving for dowry. However, our results are driven by households that are above the poverty line. This suggests that more severe income-constraints or behavioural biases resulting from poverty, prevent extremely poor households from saving for their daughters’ dowries in advance. This heterogeneity in effects is consistent with the literature on barriers to savings among extremely poor households (DellaVigna 2009, Karlan et al. 2014, Kremer et al. 2019). These barriers arise due to income constraints, information and knowledge gaps, poor access to formal savings products, and behavioural constraints, such as present-bias, lack of self-control, and limited memory and attention, that may in turn be exacerbated by poverty.

This article is the second of a two-part series, and is published in collaboration with the World Bank’s Let’s Talk Development Blog.

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Notes:

If girls are born in relatively larger families as compared to boys due to son-biased stopping rules (in choosing how many children to have), then girl-families would mechanically have lower savings per person, for instance, irrespective of dowry expectations.
Indian parents are more likely to practice sex-selective abortions after a FB girl and follow son-biased stopping rules, resulting in more girls on average in FG relative to FB households.
There has been no change in the proportion of girls among first births in India over time, despite changes in the availability of prenatal sex-selection technology. Most sex-selective abortions in India take place at birth orders two and above.
We assume that parents form expectations about dowry amounts by observing dowries in their caste and state around the time of child’s birth.
Also see Bhalotra et al. (2020) who argue that dowry costs motivate son-preferring behaviours in India.