EDUCATIONAL INVESTMENTS IN A SPATIALLY VARIED ECONOMY

This paper presents a simple two-period, dual economy model in which migration options may affect the informal financing of educational investments. When credit contracts are universally available and perfectly enforceable, spatially varied returns to human capital have no effect on educational investment patterns. But when financial markets are incomplete and informal mechanisms subject to imperfect contract enforcement must fill the breach, spatial inequality in infrastructure or other attributes that affect the returns to education create spatial differentiation in educational lending and consequently, in educational attainment. Although migration options can increase the returns to education, they can also choke off the informal finance on which poorer rural households depend for long-term, lumpy investments like children's education.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/14737
Total Pages:
36
JEL Codes:
O1; I1
Series Statement:
Working Paper 2003-21




 Record created 2017-04-01, last modified 2017-08-23

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