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Do returns to education matter to schooling participation? Evidence from India

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  • Geeta Gandhi Kingdon
  • Nicolas Theopold

Abstract

While it might be expected that demand for schooling will depend positively on the economic returns to education (ER) in the local labor market, in fact there is theoretical ambiguity about the sign of the schooling-ER relationship when households are liquidity-constrained. Whether the relationship is positive or negative depends on which effect dominates - the positive substitution effect of an increase in ER on years of education, or the negative income effect. For India, we find a positive relationship between the rate of return to education for adults in the local labor market and school attainment of girls and non-poor boys. The size of the effect of ER on years of education acquired is large for some groups. However, for poor boys the negative income effect dominates the positive substitution effect. Thus, while improved economic incentives for acquiring education have a positive impact on educational attainment of girls and non-poor boys, they worsen the educational attainment of poor boys. Policy implications are discussed.

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  • Geeta Gandhi Kingdon & Nicolas Theopold, 2008. "Do returns to education matter to schooling participation? Evidence from India," Education Economics, Taylor & Francis Journals, vol. 16(4), pages 329-350.
    • Handle: RePEc:taf:edecon:v:16:y:2008:i:4:p:329-350
    DOI: 10.1080/09645290802312453
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    5. Sanghamitra Kanjilal-Bhaduri & Francesco Pastore, 2018. "Returns to Education and Female Participation Nexus: Evidence from India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(3), pages 515-536, September.
    6. Anjan Ray Chaudhury, 2017. "Interpreting the Disparity in Educational Attainment among Various Socio-religious Groups in India," IIM Kozhikode Society & Management Review, , vol. 6(1), pages 73-89, January.
    7. Sikdar, Satadru, 2019. "Rate of Return to Education in India: Some Insights," Working Papers 19/270, National Institute of Public Finance and Policy.
    8. Lindskog, Annika, 2011. "Does a Diversification Motive Influence Children’s School Entry in the Ethiopian Highlands?," Working Papers in Economics 494, University of Gothenburg, Department of Economics.
    9. Kanjilal-Bhaduri, Sanghamitra & Pastore, Francesco, 2018. "Returns to Education and Female Work Force Participation Nexus: Evidence from India," GLO Discussion Paper Series 162, Global Labor Organization (GLO).
    10. Yasser Razak Hussain & Pranab Mukhopadhyay, 2023. "How Much do Education, Experience, and Social Networks Impact Earnings in India? A Panel Data Analysis Disaggregated by Class, Gender, Caste and Religion," SAGE Open, , vol. 13(4), pages 21582440231, December.
    11. Singh, Ashish, 2010. "Inequality of opportunity in India," MPRA Paper 32971, University Library of Munich, Germany.
    12. Nerman, Måns & Owens, Trudy, 2010. "The Push Towards UPE and the Determinants of the Demand for Education in Tanzania," Working Papers in Economics 472, University of Gothenburg, Department of Economics, revised 13 Mar 2012.
    13. Husain, Zakir & Dutta, Mousumi & Saha, Manashi, 2011. "Gender disparities in primary education across siblings: is intra household disparity higher in regions with low child sex ratios?," MPRA Paper 30791, University Library of Munich, Germany.
    14. Tushar Agrawal & S .Chandrasekhar, 2015. "Short term migrants in India: Characteristics, wages and work transition," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-007, Indira Gandhi Institute of Development Research, Mumbai, India.
    15. Chen, Jie & Kanjilal-Bhaduri, Sanghamitra & Pastore, Francesco, 2022. "Updates on Returns to Education in India: Analysis Using PLFS 2018-19 Data," IZA Discussion Papers 15002, Institute of Labor Economics (IZA).
    16. Gille, Véronique, 2015. "Distribution of human capital and income: An empirical study on Indian States," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 239-256.
    17. S Madheswaran, 2016. "The Changing Rates of Return to Education in India: Evidence from NSS Data," Working Papers id:11324, eSocialSciences.
    18. Agrawal, Tushar, 2014. "Gender and caste-based wage discrimination in India : some recent evidence," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 47(4), pages 329-340.
    19. Muhammed Refeque & P. Azad, 2022. "How do linguistic and technical skills affect earnings in India?," Indian Economic Review, Springer, vol. 57(1), pages 23-57, June.
    20. Sakari Saaritsa, 2017. "Forever gender equal and child friendly? Intrahousehold allocations to health in Finland before the Nordic welfare state," European Review of Economic History, European Historical Economics Society, vol. 21(2), pages 159-184.
    21. Tushar Agrawal, 2011. "Returns to education in India: Some recent evidence," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-017, Indira Gandhi Institute of Development Research, Mumbai, India.
    22. Singhari, Smrutirekha & Madheswaran, S., 2016. "Changing rates of return to education in India: Evidence from NSS data," Working Papers 358, Institute for Social and Economic Change, Bangalore.
    23. Alcott, Benjamin & Rose, Pauline, 2017. "Learning in India’s primary schools: How do disparities widen across the grades?," International Journal of Educational Development, Elsevier, vol. 56(C), pages 42-51.
    24. Jannet Farida Jacob, 2018. "Human capital and higher education: rate of returns across disciplines," Economics Bulletin, AccessEcon, vol. 38(2), pages 1241-1256.

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