Economics 172 Issues in African Economic Development Lecture 13 February 28, 2006.

Economics 172Issues in African Economic Development

Lecture 13

February 28, 2006

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Outline:

(1) New topic: Education and economic development

(2) Models of educational investments

(3) The Girls Scholarship Program (GSP) in Kenya

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Education and economic development

• Does education lead to higher income? OR does higher income lead to more educational investment?

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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)

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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

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(2) Education may improve adoption of new technologies, e.g., in agriculture, health

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(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

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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

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• 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

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• 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

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• Children allocate their time budget T between studying (x) and working. The wage for child labor is w>0

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• 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

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Other issues in educational investment

(1) Positive spillovers within classrooms, households and firms to schooling underinvestment in education

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(2) Children may choose to invest too little in schooling even for themselves, due to high discount rates

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(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

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The Girls Scholarship Program (GSP)

• GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya

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• 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

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• 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?

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• Treatment and comparison group schools are similar (Table 3, Figure 5)

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Whiteboard #1

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Whiteboard #2

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Whiteboard #3

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Whiteboard #4

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Whiteboard #5

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Map of Africa

Economics 172 Issues in African Economic Development Lecture 13 February 28, 2006.

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Transcript of Economics 172 Issues in African Economic Development Lecture 13 February 28, 2006.