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Economic Shocks and Changes in School Attendance Levels and Education Expenditure in Peru


  • Escobal, Javier
  • Saavedra, Jaime
  • Suárez, Pablo


Despite improvements in enrolment rates in recent decades, the Peruvian school system still has serious shortcomings. A high drop-out rate in secondary school stems from the fact that the system does not provide adequate support for students who fall behind, cannot afford to go to school, or would rather work than continue their education. The situation becomes particularly difficult for households who face economic shocks that force them to reassign time and money away from education. This paper studies the effect of economic shocks on household investment patterns in Peru using a sample of 6- to 14-year-old children going through the Peruvian education system. Most studies that have tried to determine the effect of economic shocks on human capital (investment in education, skills training, health, and well-being) have focused on an analysis of changes in school enrolment. The authors here suggest a more comprehensive analysis of the possible mechanisms through which investment in education can be affected. The conclusions presented here support the hypothesis that shocks have an impact on the quality, rather than the length, of education. The evidence shows that shocks do not necessarily effect the school drop-out rate or the rate of ‘over-age schooling’ (of children at least one year older than the age expected for their grade). The evidence does demonstrate, however, that negative shocks do reduce the effective accumulation of human capital through cuts in spending on education, in both urban and rural areas. Results are significant both when a short-term shock is brought about by changes in household income or expenses and when it is brought about by changes in employment status.

Suggested Citation

  • Escobal, Javier & Saavedra, Jaime & Suárez, Pablo, 2005. "Economic Shocks and Changes in School Attendance Levels and Education Expenditure in Peru," MPRA Paper 56481, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:56481

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    References listed on IDEAS

    1. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
    2. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 311-335.
    3. Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995. "Education and the poverty trap," European Economic Review, Elsevier, vol. 39(7), pages 1257-1275, August.
    4. Binder, Melissa, 1999. "Schooling indicators during Mexico's "Lost decade"," Economics of Education Review, Elsevier, vol. 18(2), pages 183-199, April.
    5. Sawada, Yasayuki & Lokshin, Michael, 2001. "Household schooling decisions in rural Pakistan," Policy Research Working Paper Series 2541, The World Bank.
    6. Ranjan, Priya, 2001. "Dynamic evolution of income distribution and credit-constrained human capital investment in open economies," Journal of International Economics, Elsevier, vol. 55(2), pages 329-358, December.
    7. Sedlacek, Guilherme & Costa, Daniela Ribeiro da & Carvalho, Alexandre & Gustafsson-Wright, Emily & Neri, Marcelo Côrtes, 2000. "Microeconomic instability and children's human capital accumulation: the effects of idiosyncratic shocks to father's income on child labor, school drop-outs and repetition rates in Brazil," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 394, FGV EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    8. Funkhouser, Edward, 1999. "Cyclical economic conditions and school attendance in Costa Rica," Economics of Education Review, Elsevier, vol. 18(1), pages 31-50, February.
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    Cited by:

    1. Meltem A. Aran, 2013. "Welfare Impact of the Global Financial Crisis of 2008-2009 on Turkish Households," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 2(2), pages 13-52, May.
    2. Escobal, Javier & Ponce, Carmen, 2007. "Trade Liberalisation and Child Welfare: Assessing the Impact of a Free Trade Agreement Between Peru and the USA," MPRA Paper 56477, University Library of Munich, Germany.
    3. Santiago Cueto & Javier Escobal & Javier Escobal & Patricia Ames & Mary Penny, 2012. "¿Quién se queda atrás?: resultados iniciales del estudio Niños del Milenio: tercera ronda de encuestas en el Perú," Documentos de Trabajo (Niños del Milenio-GRADE) ninosm3r, Niños del Milenio (Young Lives).
    4. repec:ags:eeaeje:258848 is not listed on IDEAS

    More about this item


    Peru; education; economic shocks; human capital;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D19 - Microeconomics - - Household Behavior - - - Other
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development


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