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Educational Investments in a Dual Economy

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  • ANDREW G. MUDE
  • CHRISTOPHER B. BARRETT
  • JOHN G. McPEAK
  • CHERYL R. DOSS

Abstract

We present a simple two-period, dual-economy model in which migration options may affect the informal financing of educational investments. When credit contracts are universally available and perfectly enforceable, spatially varied returns to human capital have no effect on educational investment patterns. But when financial markets are incomplete and informal mechanisms with imperfect contract enforcement must fill the breach, attributes that affect the returns to education will affect educational lending and, consequently, educational attainment. Migration options can increase the returns to education, but can also choke off the informal finance on which poorer rural households may depend for long-term, lumpy investments like children's education. Copyright (c) The London School of Economics and Political Science 2006.

Suggested Citation

  • ANDREW G. MUDE & CHRISTOPHER B. BARRETT & JOHN G. McPEAK & CHERYL R. DOSS, 2007. "Educational Investments in a Dual Economy," Economica, London School of Economics and Political Science, vol. 74(294), pages 351-369, May.
  • Handle: RePEc:bla:econom:v:74:y:2007:i:294:p:351-369
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    Cited by:

    1. G Johnes, 2009. "It Was All Gonna Trickle Down: What Has Growth In India''s Advanced Sectors Really Done For The Rest?," Working Papers 601653, Lancaster University Management School, Economics Department.
    2. repec:lan:wpaper:4357 is not listed on IDEAS
    3. repec:lan:wpaper:4486 is not listed on IDEAS
    4. Vincenzo Lombardo, 2008. "Dual Economy Models: A Primer for…Growth, Income Distribution and Poverty Analysis," Working Papers 12_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    5. Vincenzo Lombardo, 2012. "Modern foundations of dual economy models," Discussion Papers 8_2012, CRISEI, University of Naples "Parthenope", Italy.
    6. Donald S. Allen & Leonce Ndikumana, 1999. "Income inequality and minimum consumption: implications for growth," Working Papers 1999-013, Federal Reserve Bank of St. Louis.
    7. repec:lan:wpaper:4791 is not listed on IDEAS
    8. Bevis, Leah E.M. & Barrett, Christopher B., 2015. "Decomposing Intergenerational Income Elasticity: The Gender-differentiated Contribution of Capital Transmission in Rural Philippines," World Development, Elsevier, vol. 74(C), pages 233-252.

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