Educational Investments in a Spatially Varied Economy

Cornell University, Applied Economics Working Paper No. 2003-21

38 Pages Posted: 9 Sep 2003

See all articles by Andrew G. Mude

Andrew G. Mude

Cornell University - Department of Economics

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

John G. McPeak

Syracuse University - Department of Economics

Cheryl R. Doss

University of Oxford - Department of International Development

Date Written: July 2003

Abstract

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.

JEL Classification: O1, I2

Suggested Citation

Mude, Andrew G. and Barrett, Christopher B. and McPeak, John G. and Doss, Cheryl R., Educational Investments in a Spatially Varied Economy (July 2003). Cornell University, Applied Economics Working Paper No. 2003-21, Available at SSRN: https://ssrn.com/abstract=430420 or http://dx.doi.org/10.2139/ssrn.430420

Andrew G. Mude

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Christopher B. Barrett (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

John G. McPeak

Syracuse University - Department of Economics ( email )

Syracuse, NY 13244-1020
United States

Cheryl R. Doss

University of Oxford - Department of International Development ( email )

3 Mansfield Road
Oxford, OX1 3TB
United Kingdom

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