1. Economics 172 Issues in African Economic Development Lecture 13 February 28, 2006

2. Economics 1722 Outline: (1)New topic: Education and economic development (2)Models of educational investments (3)The Girls Scholarship Program (GSP) in Kenya

3. Economics 1723 Education and economic development Does education lead to higher income? OR does higher income lead to more educational investment?

4. Economics 1724 Education and economic development Does education lead to higher income? OR does higher income lead to more educational investment? Unclear macroeconomic evidence on education and growth (e.g., the case of Kenya)

5. Economics 1725 Education benefits beyond wages (1)Women’s education and infant mortality: each additional year of schooling is associated with a 5-10% reduction in under-5 mortality

6. Economics 1726 Education benefits beyond wages (1)Women’s education and infant mortality: each additional year of schooling is associated with a 5-10% reduction in under-5 mortality (2)Education may improve adoption of new technologies, e.g., in agriculture, health

7. Economics 1727 Education benefits beyond wages (1)Women’s education and infant mortality: each additional year of schooling is associated with a 5-10% reduction in under-5 mortality (2)Education may improve adoption of new technologies, e.g., in agriculture, health (3)Educated people may make better citizens in a democracy and be more active in civil society

8. Economics 1728 A model of educational investment Inputs into household utility include current consumption (c 1 ), and future earnings of the two children (one girl, one boy), y g and y b Their amounts of schooling are x g and x b, respectively

9. Economics 1729 A model of educational investment Inputs into household utility include current consumption (c 1 ), and future earnings of the two children (one girl, one boy), y g and y b Their amounts of schooling are x g and x b, respectively Key assumption 1: the marginal return to schooling is assumed to be larger for boys than for girls for all schooling levels: y b (x) > y g (x) for all x

10. Economics 17210 A model of educational investment Inputs into household utility include current consumption (c 1 ), and future earnings of the two children (one girl, one boy), y g and y b Their amounts of schooling are x g and x b, respectively Key assumption 1: the marginal return to schooling is assumed to be larger for boys than for girls for all schooling levels: y b (x) > y g (x) for all x Key assumption 2: there is no old-age saving in the model, other than through investments in children

11. Economics 17211 A model of educational investment Children allocate their time budget T between studying (x) and working. The wage for child labor is w>0

12. Economics 17212 A model of educational investment Children allocate their time budget T between studying (x) and working. The wage for child labor is w>0 The maximization problem: Choose x g and x b to maximize U(c 1, y) subject to two conditions, c 1 = w(T – x g ) + w(T – x b ) y = y g (x g ) + y b (x b ) Equating marginal returns to investment across boys and girls leads the household to invest more in boys

13. Economics 17213 Other issues in educational investment (1)Positive spillovers within classrooms, households and firms to schooling  underinvestment in education

14. Economics 17214 Other issues in educational investment (1)Positive spillovers within classrooms, households and firms to schooling  underinvestment in education (2)Children may choose to invest too little in schooling even for themselves, due to high discount rates

15. Economics 17215 Other issues in educational investment (1)Positive spillovers within classrooms, households and firms to schooling  underinvestment in education (2)Children may choose to invest too little in schooling even for themselves, due to high discount rates (3)Parents may not be fully altruistic towards children

16. Economics 17216 The Girls Scholarship Program (GSP) GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya

17. Economics 17217 The Girls Scholarship Program (GSP) GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya 64 Treatment schools, 63 comparison schools The top 15% of girls in program schools (by district) received a $38 prize, and a public awards ceremony

18. Economics 17218 The Girls Scholarship Program (GSP) GSP is a randomized evaluation of a merit award for Grade 6 girls in Busia and Teso districts, Kenya 64 Treatment schools, 63 comparison schools The top 15% of girls in program schools (by district) received a $38 prize, and a public awards ceremony What impact do these incentives have on test scores and other measures of school performance?

19. Economics 17219 The Girls Scholarship Program (GSP) Treatment and comparison group schools are similar (Table 3, Figure 5)

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23. Economics 17223 Whiteboard #1

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28. Economics 17228 Map of Africa