Proceedings of the German Development Economics Conference, Berlin 2011 31
Empirical evidence of education spillovers in developing countries and rural contexts is scarce and focuses on specific channels. This paper provides evidence of such spillovers in rural India, by evaluating the overall impact of education of neighbors on farm productivity. We use cross-sectional data from the India Human Development Survey of 2005. Spatial econometric tools are used to take into account social distance between neighbors. To be sure that our definition of the neighborhood does not drive our results, we test three different definitions of neighbors. Our results show that education spillovers are substantial: one additional year in the mean level of education of neighbors increases households' farm productivity by 3%. These findings are robust to changes in specification and open the way to further research. In particular, the paper does not explore the channels through which this spillover effect happens. This paper confirms the choice of improving education in developing countries: giving a child education will certainly provide him greater revenues but it may also provide his neighbors greater revenues. It also shows the importance for policy makers of taking into account education spillovers and policies' complementarity when facing political trade-offs. This paper is one of the few to underline that education externalities do not only exist in urban contexts and that education spillovers do not only occur between workers of the manufacturing and service sectors. There are also spillovers in sectors considered as more traditional such as agriculture.
Education externalities Rural India Farm productivity