Educational Investments in a Dual Economy

19 Pages Posted: 11 Apr 2007

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

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Abstract

We present 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 with imperfect contract enforcement must fill the breach, attributes that affect the returns to education will affect educational lending and, consequently, educational attainment. Migration options can increase the returns to education, but can also choke off the informal finance on which poorer rural households may depend for long-term, lumpy investments like children's education.

Suggested Citation

Mude, Andrew G. and Barrett, Christopher B. and McPeak, John G. and Doss, Cheryl R., Educational Investments in a Dual Economy. Economica, Vol. 74, No. 294, pp. 351-369, May 2007, Available at SSRN: https://ssrn.com/abstract=978551 or http://dx.doi.org/10.1111/j.1468-0335.2006.00538.x

Andrew G. Mude (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Christopher B. Barrett

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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