Intra- and inter-household externalities in children's schooling: evidence from rural residential neighbourhoods in Bangladesh

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Abstract:

This article tests for neighbourhood effects on children's schooling, using unique data on rural residential neighbourhoods from Bangladesh. We find that school completion of children is positively and significantly affected by the mean grade completion of other children in the neighbourhood. We then present three pieces of evidence that suggest that the social effect offers a valid explanation. Firstly, the evidence we find of inter-household externalities is not driven out by control for a host of neighbourood and household attributes. Secondly, the result remains robust to neighbourhood composition effects: it is unchanged as we purge our main sample of the households within the neighbourhood that are potentially linked in terms of their recent history of partition. Thirdly, a similar peer effect is found for adults who completed schooling before the introduction of existing educational reforms in rural areas suggesting that the observed effect of growing up in educated neighbourhood does not merely capture the influence of common exposure to various government educational interventions. As a by-product, the article also provides evidence of intra-household externality in children's schooling, net of neighbourood externalities. We conclude by discussing the implication of these findings for education policy design.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840802600590

Affiliations: Department of Economics, University of Reading, Reading, RG6 6AA, UK,ESRC Centre on Skills, Knowledge and Organization Performance (SKOPE), University of Oxford, UK,Centre for International Development, Queen Elizabeth House, University of Oxford, UK,Centre for the Study of African Economies, University of Oxford, UK,Institute for the Study of Labour (IZA), Bonn, Germany

Publication date: May 1, 2011

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