EC319 Development

Economics

Lecture 2:
Human Capital Part I: Education
Enrollment evidence and policy

Dr. Samantha Rawlings

s.b.rawlings@reading.ac.uk
Edith Morley 190

Copyright University of Reading

 Lecture 2 will consider:

1. Evidence on school enrollment, focusing on:

• Evidence on parental responses to changes in
different factors that make up S.
• Examples of government policy in targeting S.
2. An introduction to a widely used education policy in
low income countries: Conditional Cash Transfers.
This lecture follows directly on from the Week 1
screencast.
 Quick question

What is the ultimate goal of governments and NGO’s when creating

education policies and programs?
a) To draw more children into schools
b) To encourage children to remain in school for longer
c) Increase the value of children are learning in school
d) To speed development by encouraging investment in human
capital
Go to www.menti.com
 Policy makers care about the
production function for learning

• Suggests policy levers for improving human capital:

1. Quality of schooling, Q
2. Prices, P
3. Policies targeted to specific characteristics, (C, H)
• But: they need to understand parent’s decisions around S and I in order to
understand ultimate effect on achievement, A.
School enrolment decisions
Key equation for decision making of parents:

Households’ enrolment choices depend on many

characteristics of the education opportunities they face
(prices, quality), as well as local socioeconomic
conditions, their own household characteristics, and the
gender, status, and abilities of their children.
 Discussion Question

Many children complete primary school but do not complete

secondary school. Within the simple model of school enrollment
decisions presented earlier, what might explain why their parents
choose to send them to school for all primary school years but not for
all secondary school years?

What kinds of policies might be useful for increasing secondary

school completion rates among children who complete primary
school?
Targeting P: lowering costs to school

• Increasing access: building schools

• Eliminating school fees

Physical access to school
Associated costs:
1. Direct costs (costs of transportation, boarding).
2. Opportunity costs (time taken to travel to school).
3. Other costs (risk).

Empirical Test:
Efforts to reduce distances to school by
building new schools may raise enrolment
rates significantly.
• Descriptive evidence appears to agree with this. What about
causal estimates?
 Duflo (2001)

Research Question:
Can investments in infrastructure cause an increase in
educational attainment?
• Exploits a dramatic change in policy to evaluate the
effect building schools has on education and earnings
in Indonesia.
• Uses large cross section of men born 1950-1972 from
the 1995 intercensal survey of Indonesia (SUPAS).
Duflo, E. (2001). Schooling and labor market consequences of school construction in Indonesia:
Evidence from an unusual policy experiment. American Economic Review, 91(4), 795-813.
 Duflo (2001)

• Links an adult's education and wages with exposure

to program in district of birth.
• The exposure of an individual to the program was
determined by:
a. the number of schools built in his region of birth
b. his age when the program was launched.

Duflo, E. (2001). Schooling and labor market consequences of school construction in Indonesia:
Evidence from an unusual policy experiment. American economic review, 91(4), 795-813.
 Duflo (2001)

0.25 – 0.4 years 12 percent

probability
3 – 5.4 percent
of education increase in
completed primary
school wages

Evidence consistent with the hypothesis that increased

physical access to school raises enrolment.
Duflo, E. (2001). Schooling and labor market consequences of school construction in Indonesia: Evidence from an unusual
policy experiment. American economic review, 91(4), 795-813.
Access to schools: girl specific
effects
Burde and Lindan (2013) investigate effect of building schools in
villages

• Randomized controlled trial in northwest Afghanistan

Context
• Large fraction of children don’t attend school.
• Gender gaps exist.
• Many families live far from schools.
Intervention
• Entirely focused on access to primary schools.
• Randomly assign village-based schools to 13 villages
Burde, D., & Linden, L. L. (2013). Bringing education to Afghan girls: A randomized controlled trial of village-based
schools. American Economic Journal: Applied Economics, 5(3), 27-40.
 Building schools have larger
effects on girls participation

• Increased enrolment by 35 • Increased enrolment by 52

percentage points percentage points
• Raised test scores by 0.40 • Raised test scores by 0.65
standard deviations standard deviations.

Gender gap in enrolment in test villages completely eliminated!

Policy lever: eliminating school fees

• Extensive policy used historically by

governments: abolish fees to attend school.
• Equivalent to changing one element of P in the
household decision.

Question: what are the benefits of this kind of

policy? What are the draw-backs?
[hint: think about other costs facing households]
Problems with eliminating school fees

• May be difficult to enforce in practice

• School managers may react to reduction
in funding
• Does not tackle indirect costs
• May lower quality
Policy evidence: Eliminating school fees

Deinenger (2003): Case study of Uganda.

• Evaluates impact of Uganda’s program of “Universal
Primary Education” (UPE), introduced in 1997.
• This removed primary enrollment fees.
• Before UPE, private contributions had made a major
contribution to school financing.

Deininger, K. (2003). Does cost of schooling affect enrollment by the poor? Universal primary
education in Uganda. Economics of Education review, 22(3), 291-305.
 Clear and
sustained
increase in school
enrolment
between 1996 and
1997

Deininger, K. (2003). Does cost

of schooling affect enrollment
by the poor? Universal primary
education in
Uganda. Economics of
Education review, 22(3), 291-
305.

Policy evidence: Eliminating school fees

Policy evidence: Eliminating school fees

1. Program led to a dramatic increase in enrollment.

2. The increase in attendance was particularly dramatic
for girls in the 6–8-year age group.
3. BUT: decline in quality
a. Increases in attendance not matched by hiring of additional
teachers.
b. Increase in student-teacher ratios from 38 to 65 at the
aggregate, and from 48 to 70 in rural areas.
For more discussion see:
Deininger, K. (2003). Does cost of schooling affect enrollment by the poor? Universal primary education in
Uganda. Economics of Education review, 22(3), 291-305.
 Targeting C:
child specific
characteristi
cs

• Many
programs
aim to
increase the
enrolment
rates of
girls.
A reminder: the girl-boy gap in school
enrollment
 Discussion
Questions
We see that on average, in many countries girls receive less
education than boys.
1. State at least two reasons why parents might perceive the benefits
of educating their daughters to be lower than the benefits of
educating their sons,
2. State at least two reasons why they might perceive that the costs of
educating their daughters are higher than the costs of educating
their sons.
3. What sorts of policies might be useful for raising girls’ enrollment
rates relative to boys’?
Perceived benefits may be lower for girls

Girls have
• Lower employment rates
• Work in different occupations
• Need different skills
• Have different expected wages

Parents might
• Intrinsically value less the welfare of daughters to sons.
Perceived costs may be higher for girls

Costs are broad and include non-monetary costs:

1. More risk/danger for girls to get to school/be at school.
2. Social norms around schooling – stigma/disapproval.
3. Social norms around expectations of marriage/fertility.
Providing bicycles to girls:
A simple intervention that can
make a difference
• Two recent studies have investigated whether providing girls
with bicycles to travel to school can increase school attendance.

1. Muralidharan, K., & Prakash, N. (2017). Cycling to school: Increasing

secondary school enrollment for girls in India. American Economic Journal:
Applied Economics, 9(3), 321-50.

2. Fiala, N., Garcia-Hernandez, A., Narula, K., & Prakash, N. (2022). Wheels of
change: Transforming girls' lives with bicycles.
 Providing bicycles to girls:
A simple intervention that can make a differ
Research question:
Can providing a bicycle to an
adolescent girl lead to more
education [and higher measures of
empowerment]?

Context:
• Rural Zambia - 98% of girls in
sample walk to school.
• Average travel time 110 minutes
(one way!).
• 35% report being sexually harassed
during their commute
Providing bicycles to girls:
A simple intervention that can make a differ
Randomised whether received bike or not.
One year later:

Reduced Decreased
absenteeism by Improved math
commuting time
27% test scores
by 35%

Greater impact for girls that live further away from school
Targeting H: household specific
interventions

1. Providing information

2. Easing liquidity constraints

Jensen (2010) : Improving
information
• Assumption in model of schooling decision is full
information.
• What if this isn’t the case?
• Parents may underinvest in child schooling because
they are not aware of the labour market returns to
education
Empirical Test:
Policy efforts to raise parental understanding of labour
market returns may raise enrolment rates.
28
 Question:

What do you think the return

(monetary value) to an
economics degree is?
a) For men?
b) For women?
Jensen (2010) : Improving
information
• Uses survey data on eighth-grade boys in the
Dominican Republic.
• Perceived returns to secondary school are
extremely low, despite high measured returns.
• Students at a randomly selected subset of
schools were provided information on the
returns estimated from earnings data.
30
Jensen (2010) : Improving
information
• Relative to those not provided with information, these
students:
• Reported dramatically increased perceived returns
when re-interviewed four to six months later,
• On average, completed 0.20 more years of schooling
over the next four years.
• Suggests that improving information on returns to
schooling may induce parents to choose more
schooling for their children.
 Extensive evidence that
liquidity constraints matter
• Edmonds (2006) investigates whether anticipated income shock
affects child schooling.

• If no liquidity constraints, should see no effect.

• If liquidity constraints exist, households will only increase

schooling after receiving money.

• Finds evidence that schooling increases in South Africa when

anticipated pension income is received.

• Suggest liquidity constraints exist!

 Current development policy:
Conditional Cash Transfers
(CCTs)
• CCTs one of the most prevalent social assistance programes in
low and middle income countries today.

• Key features of CCTS:

• Welfare benefits with elements of conditionality

(health/education).

• Targeted transfers – target liquidity constrained households.

• Benefit: less costly than universal fee waiver.

The rise of CCTs over time
 Rationale behind CCTs

• CCT conditions are aimed at incentivizing human

capital accumulation of children.

• Addresses poverty via short- and long-run effects.

• Short run: transfers supplement income

• Long run: improved human capital of children helps

break intergenerational transmission of poverty.

• Key assumption: help overcome demand side

constraints.
 CCTs: an example in
practice
Progresa in Mexico
• Flagship CCT programme in Mexico, induced in 1997.
• Provides cash transfers to poor families.
• Provides payments for each child < 18 years of age,
enrolled in grades 3 – 9.
• Monetary value adjusted for inflation every six months,
and increase as students get older.
 CCTs: an example in
practice
Progresa in Mexico
Conditional aspect of the cash transfer:
• Student must be enrolled in school, and attend
regularly.
• If child misses 15 percent of school days in a month,
grant not received that month.

Other aspects:
• Families with girls receive more income than boys.
• Cash given, not in-kind, so free to spend on whatever
they wanted.
 Do CCTs work?
Evidence from meta-
analysis
• Huge literature on effectiveness of CCTs.
• Studies consistently demonstrate positive effects of CCTs on secondary
enrolment.
• Recent meta-analysis carried out by Garcia and Saavedra (2017):
• Consider 94 studies from 47 conditional cash transfer programs in low- and
middle-income countries worldwide,
• Average effect on secondary school enrolment: 7 percentage point increase
(relative to 50% baseline enrolment)
• However: variation in effectiveness of CCTs, depending on program
design.
Discussion Question to think about….

What are the benefits of a conditional cash

transfer vs. an unconditional cash transfer?

What are the costs?

Next Steps: After this lecture you should :

• Ensure you understand how

policy reflects the economic
model of decision making.
• Review Garcia and Saavedra
(2023) to enhance
understanding of CCT
programs.
• Watch the screencast for this
week – CCT theory.
 Readings to support your
learning
1. Schaffner, Julie. Development Economics: Theory, Empirical Research and
Policy Analysis. John Wiley and Sons. 2014. Chapter 19

2. Todaro, Michael P., and Stephen C. Smith. Economic development. 12th

edition Pearons 2012. Chapter 8.1, 8.2

3. García, S., & Saavedra, J. (2022). Conditional cash transfers for education.
NBER working paper

4. García, S., & Saavedra, J. E. (2017). Educational impacts and cost-

effectiveness of conditional cash transfer programs in developing
countries: A meta-analysis. Review of Educational Research, 87(5), 921-965.

Textbooks are available in the library, and journal articles are available through
the online reading list on blackboard.