Education in India : market failures and political considerations
Governments around the world fund schools and are also involved in operating them. There is wide agreement that governments should be involved in provision of education, but the appropriate level and form of their involvement is a subject of debate. The key justifications for government involvement are externalities and credit market imperfections, and this thesis examines these inefficiencies within the context of India's education system. Chapter 2 assesses human capital externalities in India. It demonstrates that living in a locality with educated individuals has a strong beneficial effect on wages over and above the effect of one's own education. In line with theoretical predictions, the effect is strongest for small geographical areas. In contrast to a general equilibrium interpretation of the results, skilled labour also benefits from a better level of local education. Furthermore, human capital externalities are more pronounced in nonprimary industries. Chapter 3 analyses the effect of credit constraints on education. The principal findings are that credit constraints significantly reduce school attendance and increase wealth inequalities in educational outcomes. Temporary income shocks reduce the probability of attending school, but access to credit mitigates this effect. Finally, the results are not limited to short-term outcomes, but are also seen to be present in long-term outcomes. Chapter 4 studies how representation of teachers in India's state Upper Houses affects the provision of education. The main results are that teacher representation increases employment of teachers in represented schools and reduces employment in unrepresented schools, with a corresponding effect on educational outcomes. Rather than achieving the intended objectives of teacher representation, teachers seem to have used their political power to shift resources in their favour.