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Schooling, wages and profits: Negative pecuniary externalities from schooling and their consequences for schooling investments

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  • Kochar, Anjini
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    Abstract

    This paper tests the hypothesis that the schooling of the poor reduces profits for landowners, and that such negative pecuniary externalities in turn adversely affect schooling investments made by local governments. A theoretical model of occupational choice in the presence of credit and labor market constraints, combined with existing political economy models of the delivery of local public goods delivers such a result. This hypothesis is tested using household data from India. The empirical analysis shows that profits are reduced by the schooling of the poor and that this is primarily because of the effect of schooling on wages. It also shows that the negative effect of wages on profits reduces government provided schooling inputs.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Development Economics.

    Volume (Year): 86 (2008)
    Issue (Month): 1 (April)
    Pages: 76-95

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    Handle: RePEc:eee:deveco:v:86:y:2008:i:1:p:76-95

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    Web page: http://www.elsevier.com/locate/devec

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    1. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Bourguignon, F. & Verdier, T., 1997. "Oligarchy, Democracy, Inequality and Growth," DELTA Working Papers 97-10, DELTA (Ecole normale supérieure).
    3. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 265-86, April.
    4. Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
    5. Kochar, Anjini, 2004. "Urban influences on rural schooling in India," Journal of Development Economics, Elsevier, vol. 74(1), pages 113-136, June.
    6. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
    7. Galasso, Emanuela & Ravallion, Martin, 2000. "Distributional outcomes of a decentralized welfare program," Policy Research Working Paper Series 2316, The World Bank.
    8. Pranab Bardhan & Dilip Mookherjee, 2006. "Decentralisation and Accountability in Infrastructure Delivery in Developing Countries," Economic Journal, Royal Economic Society, vol. 116(508), pages 101-127, 01.
    9. Topel, Robert, 1999. "Labor markets and economic growth," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 44, pages 2943-2984 Elsevier.
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    Cited by:
    1. Bardhan, Pranab & Mookherjee, Dilip, 2012. "Political Clientelism and Capture: Theory and Evidence from West Bengal, India," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    2. Kim, Se-Um, 2008. "The Technological Origins of the High School Movement," MPRA Paper 12087, University Library of Munich, Germany.

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