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Educational Investments in a Dual Economy
Author(s) -
MUDE ANDREW G.,
BARRETT CHRISTOPHER B.,
McPEAK JOHN G.,
DOSS CHERYL R.
Publication year - 2007
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2006.00538.x
Subject(s) - affect (linguistics) , investment (military) , economics , human capital , enforcement , imperfect , labour economics , finance , educational attainment , dual (grammatical number) , business , market economy , economic growth , philosophy , linguistics , art , literature , politics , political science , law
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.