Abstract
This paper studies a fundamental trade-off faced by low-income households in developing countries: whether to invest in productive assets to improve productivity and build resilience, or to invest in human capital to enable entry into the skilled labor market. We study quantitatively how perceptions of risk and returns associated with climate change and structural transformation affect investment decisions. We conduct two field experiments with over 2,000 pastoralist parents in rural Kenya and Ethiopia: a hypothetical choice experiment to estimate parental preferences and subjective beliefs over their children's future education, occupation, and livestock production, and an information intervention that exogenously shifts beliefs about these returns to examine how households adjust actual investment decisions. Together, these analyses allow us to test and quantify how risks associated with productive assets shape human capital investment.