Economics 172 2
Outline:
(1) New topic: Education and economic development
(2) Models of educational investments
(3) The Girls Scholarship Program (GSP) in Kenya
Economics 172 3
Education and economic development
• Does education lead to higher income? OR does higher income lead to more educational investment?
Economics 172 4
Education and economic development
• Does education lead to higher income? OR does higher income lead to more educational investment?
• Unclear macroeconomic evidence on education and growth (e.g., the case of Kenya)
Economics 172 5
Education benefits beyond wages
(1) Women’s education and infant mortality: each additional year of schooling is associated with a 5-10% reduction in under-5 mortality
Economics 172 6
Education benefits beyond wages
(1) Women’s education and infant mortality: each additional year of schooling is associated with a 5-10% reduction in under-5 mortality
(2) Education may improve adoption of new technologies, e.g., in agriculture, health
Economics 172 7
Education benefits beyond wages
(1) Women’s education and infant mortality: each additional year of schooling is associated with a 5-10% reduction in under-5 mortality
(2) Education may improve adoption of new technologies, e.g., in agriculture, health
(3) Educated people may make better citizens in a democracy and be more active in civil society
Economics 172 8
A model of educational investment
• Inputs into household utility include current consumption (c1), and future earnings of the two children (one girl, one boy), yg and yb
• Their amounts of schooling are xg and xb, respectively
Economics 172 9
A model of educational investment
• Inputs into household utility include current consumption (c1), and future earnings of the two children (one girl, one boy), yg and yb
• Their amounts of schooling are xg and xb, respectively
• Key assumption 1: the marginal return to schooling is assumed to be larger for boys than for girls for all schooling levels: yb(x) > yg(x) for all x
Economics 172 10
A model of educational investment
• Inputs into household utility include current consumption (c1), and future earnings of the two children (one girl, one boy), yg and yb
• Their amounts of schooling are xg and xb, respectively
• Key assumption 1: the marginal return to schooling is assumed to be larger for boys than for girls for all schooling levels: yb(x) > yg(x) for all x
• Key assumption 2: there is no old-age saving in the model, other than through investments in children
Economics 172 11
A model of educational investment
• Children allocate their time budget T between studying (x) and working. The wage for child labor is w>0
Economics 172 12
A model of educational investment
• Children allocate their time budget T between studying (x) and working. The wage for child labor is w>0
• The maximization problem: Choose xg and xb to maximize U(c1, y) subject to two conditions,
c1 = w(T – xg) + w(T – xb)
y = yg(xg) + yb(xb)
• Equating marginal returns to investment across boys and girls leads the household to invest more in boys
Economics 172 13
Other issues in educational investment
(1) Positive spillovers within classrooms, households and firms to schooling underinvestment in education
Economics 172 14
Other issues in educational investment
(1) Positive spillovers within classrooms, households and firms to schooling underinvestment in education
(2) Children may choose to invest too little in schooling even for themselves, due to high discount rates
Economics 172 15
Other issues in educational investment
(1) Positive spillovers within classrooms, households and firms to schooling underinvestment in education
(2) Children may choose to invest too little in schooling even for themselves, due to high discount rates
(3) Parents may not be fully altruistic towards children
Economics 172 16
The Girls Scholarship Program (GSP)
• GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya
Economics 172 17
The Girls Scholarship Program (GSP)
• GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya
• 64 Treatment schools, 63 comparison schools
• The top 15% of girls in program schools (by district) received a $38 prize, and a public awards ceremony
Economics 172 18
The Girls Scholarship Program (GSP)
• GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya
• 64 Treatment schools, 63 comparison schools
• The top 15% of girls in program schools (by district) received a $38 prize, and a public awards ceremony
• What impact do these incentives have on test scores and other measures of school performance?
Economics 172 19
The Girls Scholarship Program (GSP)
• Treatment and comparison group schools are similar (Table 3, Figure 5)