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Educational Investments In A Spatially Varied Economy

Author

Listed:
  • Mude, Andrew G.
  • Barrett, Christopher B.
  • McPeak, John G.
  • Doss, Cheryl R.

Abstract

This paper presents 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 subject to imperfect contract enforcement must fill the breach, spatial inequality in infrastructure or other attributes that affect the returns to education create spatial differentiation in educational lending and consequently, in educational attainment. Although migration options can increase the returns to education, they can also choke off the informal finance on which poorer rural households depend for long-term, lumpy investments like children's education.

Suggested Citation

  • Mude, Andrew G. & Barrett, Christopher B. & McPeak, John G. & Doss, Cheryl R., 2003. "Educational Investments In A Spatially Varied Economy," Working Papers 14737, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:14737
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    File URL: http://ageconsearch.umn.edu/record/14737/files/wp030021.pdf
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    References listed on IDEAS

    as
    1. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
    2. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    3. Abhijit V. Banerjee & Andrew F. Newman, 1998. "Information, the Dual Economy, and Development," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 631-653.
    4. Strauss, John & Thomas, Duncan, 1995. "Human resources: Empirical modeling of household and family decisions," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 34, pages 1883-2023 Elsevier.
    5. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 495-526.
    6. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier.
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