Inequality and Education Decisions in Developing Countries

In this paper, we analyze the effect of inequality on school enrollment, preferred tax rate and expenditure per student in developing countries; when parents can choose between child labor, public schooling, or private schooling. We present a model in which parents make schooling decisions for their...

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Main Authors:	Gutierrez, Catalina, Tanaka, Ryuichi
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Household Production and Intrahousehold Allocation D130 Personal Income, Wealth, and Their Distributions D310 Personal Income and Other Nonbusiness Taxes and Subsidies includes inheritance and gift taxes H240 Analysis of Education I210 Fertility Family Planning Child Care INTERDISCIPLINARY RESEARCH AREAS :: Children Youth J130 Economic Development: Human Resources Human Development Income Distribution Migration O150 Fiscal and Monetary Policy in Development O230
Online Access:	http://hdl.handle.net/10986/5813

id	okr-10986-5813
recordtype	oai_dc
spelling	okr-10986-58132021-04-23T14:02:23Z Inequality and Education Decisions in Developing Countries Gutierrez, Catalina Tanaka, Ryuichi Household Production and Intrahousehold Allocation D130 Personal Income, Wealth, and Their Distributions D310 Personal Income and Other Nonbusiness Taxes and Subsidies includes inheritance and gift taxes H240 Analysis of Education I210 Fertility Family Planning Child Care INTERDISCIPLINARY RESEARCH AREAS :: Children Youth J130 Economic Development: Human Resources Human Development Income Distribution Migration O150 Fiscal and Monetary Policy in Development O230 In this paper, we analyze the effect of inequality on school enrollment, preferred tax rate and expenditure per student in developing countries; when parents can choose between child labor, public schooling, or private schooling. We present a model in which parents make schooling decisions for their children, weighing the utility benefit of having a child with formal public or private education versus the forgone income from child labor or household work. Parents vote over the preferred tax rate to finance freely provided public education. The utility benefit of an educated child is proportional to expenditure per student, so that there is congestion in public school. We find that when parents can send their children to work or to private school, high inequality leads to exit from public education at both ends of the income distribution. Thus high inequality reduces the support for public education, leading to a low tax rate and expenditure per student. Exit from public education results in both high child labor and a large fraction of students attending private school. In fact there is a threshold level of inequality above which there is no longer support for public education. In addition we explore the implications for the design of foreign aid. The results suggest that foreign aid policies should focus on promoting school attendance rather than increasing school resources, as the later policy might be offset by a reduction in the recipient country's fiscal effort, with little impact on outcomes. 2012-03-30T07:34:40Z 2012-03-30T07:34:40Z 2009 Journal Article Journal of Economic Inequality 15691721 http://hdl.handle.net/10986/5813 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Household Production and Intrahousehold Allocation D130 Personal Income, Wealth, and Their Distributions D310 Personal Income and Other Nonbusiness Taxes and Subsidies includes inheritance and gift taxes H240 Analysis of Education I210 Fertility Family Planning Child Care INTERDISCIPLINARY RESEARCH AREAS :: Children Youth J130 Economic Development: Human Resources Human Development Income Distribution Migration O150 Fiscal and Monetary Policy in Development O230
spellingShingle	Household Production and Intrahousehold Allocation D130 Personal Income, Wealth, and Their Distributions D310 Personal Income and Other Nonbusiness Taxes and Subsidies includes inheritance and gift taxes H240 Analysis of Education I210 Fertility Family Planning Child Care INTERDISCIPLINARY RESEARCH AREAS :: Children Youth J130 Economic Development: Human Resources Human Development Income Distribution Migration O150 Fiscal and Monetary Policy in Development O230 Gutierrez, Catalina Tanaka, Ryuichi Inequality and Education Decisions in Developing Countries
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	In this paper, we analyze the effect of inequality on school enrollment, preferred tax rate and expenditure per student in developing countries; when parents can choose between child labor, public schooling, or private schooling. We present a model in which parents make schooling decisions for their children, weighing the utility benefit of having a child with formal public or private education versus the forgone income from child labor or household work. Parents vote over the preferred tax rate to finance freely provided public education. The utility benefit of an educated child is proportional to expenditure per student, so that there is congestion in public school. We find that when parents can send their children to work or to private school, high inequality leads to exit from public education at both ends of the income distribution. Thus high inequality reduces the support for public education, leading to a low tax rate and expenditure per student. Exit from public education results in both high child labor and a large fraction of students attending private school. In fact there is a threshold level of inequality above which there is no longer support for public education. In addition we explore the implications for the design of foreign aid. The results suggest that foreign aid policies should focus on promoting school attendance rather than increasing school resources, as the later policy might be offset by a reduction in the recipient country's fiscal effort, with little impact on outcomes.
format	Journal Article
author	Gutierrez, Catalina Tanaka, Ryuichi
author_facet	Gutierrez, Catalina Tanaka, Ryuichi
author_sort	Gutierrez, Catalina
title	Inequality and Education Decisions in Developing Countries
title_short	Inequality and Education Decisions in Developing Countries
title_full	Inequality and Education Decisions in Developing Countries
title_fullStr	Inequality and Education Decisions in Developing Countries
title_full_unstemmed	Inequality and Education Decisions in Developing Countries
title_sort	inequality and education decisions in developing countries
publishDate	2012
url	http://hdl.handle.net/10986/5813
_version_	1764396395870027776

Inequality and Education Decisions in Developing Countries

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