Emerging Challenges for Indian Education Policy

This paper employs a large data set (1993 Human Development of India) to examine whether and how school quality affects households’ enrollment decisions in India. Regressions using instrumental variables find that better school quality, measured by lower student-teacher ratios, tends to increase the probability that both boys and girls will attend school. The paper also finds the effect of school quality to vary with the socio-economic characteristics of the household. In particular, households and regions with a lower level of education attainment are more adversely affected by poor school quality than are better-schooled households and regions. Government expenditure on schooling is negatively correlated with variations in school quality, or schooling inequality. To explain why school quality matters less for more educated households, this paper investigates the role of privately financed inputs. Although richer households have increased their use of private schools and home tutors more than have poorer households, we cannot conclude, therefore, that households use private schooling inputs to substitute for the poor quality of public schools. The empirical evidence seems to suggest that higher public schooling expenditures are positively correlated with more rapid growth in private school enrollments. This is the “public” nature of India’s “private” schools, which may reflect governmental regulation of private schools.