parents in general experienced higher income growth after liberalization compared to the rural parents, thus they could afford to invest in the education of daughters to reap the benefits of high returns.<sup>44</sup> Interestingly, contrary to the conventional view, son preference in education in fact implies that as incomes grow (and/or credit market access improves), parents find it acceptable to invest in daughters‘ education. To see this, note that given the high perceived returns to a son‘s education (family lineage, old age support, dowry, social prestige etc.), the parents try to invest in son‘s education even if they face poverty. They start to invest in lower return assets such as a daughters‘ education only when they have more income and/or face lower credit constraints. It is thus only natural that the urban parents began to invest more in girls‘ education when their income grew following the liberalization. As noted above, the returns to education for women in urban areas have increased substantially over the reform period which makes it more attractive to invest in daughters‘ education.

The age at marriage for girls is also higher in urban areas, implying that the parents might be able to recoup some of the financial investment in the form of income support from working daughters before they get married.<sup>45</sup> Also, there are indications that the trade-off between dowry and investment in education of daughters has started to tilt in favor of education in urban India, and thus parents might find investing in education as better option than accumulating savings for dowry (Mishra (2011)).

Also, the force of the social norm against women‘s labor market participation is much weaker in urban areas, partly because parents are better educated and the life expectations of young women are influenced by peer effects and access to better information.

The finding that lower caste urban women experienced more mobility compared to the upper caste women may in part reflect lower social constraints on their labor market participation. The caste difference can also be understood in terms of the insightful analysis of Munshi and Rosenzweig (2006) who find that the lower caste women were able to adapt better to the new occupations, as they are not expected to follow in their father‘s footprint. This ̳freedom by neglect‘ helps the daughters achieve better occupational mobility which is likely to feed into higher educational attainment. Using survey data from Mumbai, Munshi and Rosezweig (2006) find that the sons in lower caste families

> 44 As noted before, this is due to urban and skill biased nature of economic growth in post-reform India.

> 45 In the context of Malaysia, one explanation for higher educational mobility of daughters during the New Economic Policy is that parents invest in an older daughter‘s education in expectation that she in turn will finance the education of younger brothers by sending in remittances from high paying urban jobs.  In an environment of low financial deepening and negative real interest rates, this strategy may make a good deal of economic sense, especially when the returns to women‘s education is high in urban areas, as is the case in India (see Lillard and Willis (1994) on Malaysia).

29