Estimating the Welfare Gains from Public Schools in Rural India

We adapt recently developed econometric techniques to estimate the distribution of welfare gains from public schools in rural India. Individuals have preferences over school quality and income spent on other goods. In a situation where both private and pubic schools are available, we define the cash-equivalent value of the public school as the hypothetical income sacrifice that would equate an individual’s utility to his/her utility when only the private school was available. We apply this procedure to data on income, enrollment and school quality from the Indian Human Development Survey of 2012 and estimate the distribution of implicit transfers across states and income deciles. We find these transfers are progressive. Poor households receive more on average because they have higher fertility and because their children are more likely to attend state schools. We also find however that transfers are particularly small for some of the poorest states in central and eastern India because of their low public school quality. Our methods can be generalized to measure the distribution of benefits from other types of public goods and government services.