Towards Conceptualization of a Household Educational Indicator: Incorporating Externalities

Though education is essentially an individual attribute, its positive externality goes beyond the individual to household conditioned by its gendered and generational features. Further, distributional aspects of education levels among the household members are also important in terms of its effects on its welfare outcomes. Hence, education of the head or highest educational level within the household may not adequately represent the household educational levels. In this context, we construct a household educational index that combines three aspects: distribution of education among household members, highest education level among the male and female members and difference in highest education level attained between generations. The generalised final index is found to satisfy all the axioms or the intuitive properties: monotonicity, anonymity, normalisation and uniformity. Additionally, we examine the values of the proposed indicators against the commonly used indicators including education of the household head and the highest education within the household using a representative survey from India. The empirical results indicate considerable difference between the proposed indicator and these common indicators. We also observe a strong association between our proposed indicator and welfare indicators like learning outcomes among children and having a toilet in the household. This implies usage of common indicators may underestimate the significance of education in terms of its bearing on welfare outcomes. These findings lay emphasis on the significance of conceptualizing a household educational indicator that accommodates the complexities of welfare externalities of individual educational levels within the household.