Education and poverty trap: Evidence from mountian areas in Sichuan province

Education involves current cost and future returns, thus can be viewed as an investment in human capital, which is essential for breaking the poverty traps in developing areas. Since investment decisions on education are usually made by parents, especially for young children in rural area, parents’ expectations of return on education, cost of education and their time preferences has a huge impact on the years of schooling for their children. We sketch a portrait of education investment for villagers in Daliang Mountain in Sichuan province with a detailed survey for parents. Those families have below-average income and receive government support on the 9-year compulsory education. The survey data shows parents with higher expectation of return on education are more likely to spend more time with their children on homework and tutoring, but the effect on monetary expenditure on education is insignificant. Also, children whose parents expect higher return on education are less likely to drop out from school. Both the direct costs (e.g., tuition) and indirect costs (forgone income because of schooling) don’t have significant impact on education investment. In terms of time preferences, more patient parents desire a higher level of education for their children. In summary, with government funding, the financial concern is not the major constraint for education investment for most families, but parents’ attitudes and beliefs play a more important role.