tree essays on economics of education in developing countries

Trang 1

NOTE TO USERS

Page(s) not included in the original manuscript and are unavailable from the author or university The manuscript

was scanned as received

19, 21-37

This reproduction is the best copy available

®

Trang 3

THREE ESSAYS ON ECONOMICS OF EDUCATION

IN DEVELOPING COUNTRIES

by

Mustafa Seref Akin ,

B.A., University of Istanbul, 1996 M.A., Western Illinois University, 1998

A Dissertation

Submitted in Partial Fulfillment of the Requirements for the Doctoral of Philosophy Degree

Department of Economics Southern Illinois University

Trang 4

UMI Number: 3147121

INFORMATION TO USERS

The quality of this reproduction is dependent upon the quality of the copy submitted Broken or indistinct print, colored or poor quality illustrations and photographs, print bleed-through, substandard margins, and improper alignment can adversely affect reproduction

In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted Also, if unauthorized copyright material had to be removed, a note will indicate the deletion ® UMI UMI Microform 3147121 Copyright 2004 by ProQuest Information and Learning Company

All rights reserved This microform edition is protected against unauthorized copying under Title 17, United States Code

ProQuest Information and Learning Company 300 North Zeeb Road

Trang 6

Dissertation Approval The Graduate School Southern Iilinois University April 28, 2004 IT hereby recommend that the dissertation prepared under my supervision by Mustafa Akin Entitled Three Essays on Economics of Education in Developing Countries

Trang 8

AN ABSTRACT OF THE DISSERTATION OF

Mustafa Seref Akin, for the Doctor of Philosophy degree in Economics, presented on

April 28, 2004, at Southern Illinois University at Carbondale

TITLE: Three Essays in Economics of Education in Developing Countries MAJOR PROFESSOR: Professor Kevin Sylwester

Education is nota miracle medicine to cure all social problems such as child

labor, poverty and unequal income distribution Moreover, education is an expensive treatment The main explicit costs are physical equipment and instructors’ wages The " major implicit cost is the opportunity cost of foregone earnings

| | In these essays, I deal with three different topics but all strictly related to education

Moreover, I concentrate on developing countries This dissertation examines how participation in education is associated with three different characteristics of _

development, namely: fertility, the incidence of child tabor, and urbanization This can

help policy makers better understand how education affects different characteristics of

development

The first essay deals with education and fertility in Middle Eastern countries, a region with a very high fertility rate A model of fertility will be presented to analyze the impact of female and male education and wages on fertility Both theoretical and empirical

Trang 10

The second topic is child labor Much theoretical and empirical research has been

conducted at the micro level on this issue On the other hand, not much macra analysis of

the child labor problem has been investigated The aim of the research is to assess the

association between child labor and education in a cross section of African countries This paper focuses on sub-Saharan Africa, which has the highest child labor incidence,

between 1960 and 1999

The third topic is: urbanization i in Middle East and North Africa This research

investigates reasons for urbanization in the Middle East and Northern Africa (MENA)

between 1980 and 1997, a post-oil period A theoretical model will be presented to

analyze the impact of education to urbanization In the Western World, urbanization is an

outcome of indstratizaton Results show that imdustrialization, even after oil, is not

relevant with urbanization in n MENA, Moreover, poverty in the agricultural sector also

does not affect urbanization i in this period What could be the main reasons? This research suggests: that education; amenities, commercial activities, and ï income are promoting urbanization in MENA Plus, this paper searches the relevancy of various

educational characteristics such as levels (primary, secondary and tertiary), genders and lagged years of education with urbanization Besides human capital acquisition, the accumulation of university institutions in big cities is another motive for migration in

MENA,

Trang 12

ACKNOWLEDGEMENTS

I would like to thank my dissertation chair, Kevin Sylwester, for his continual patience and encouragement Talso wish to thank the members of my dissertation committee,

Richard Grabowski, Saj al Lahiri, Scott Gilbert and Todde Headrick for their substantial

contributions to this dissertation |

Moreover, T would like to thank my mother and father for their unconditional love and support throughout my life and academic career Your hard work and wisdom made me

the person | am today A special thank goes to my sister for her understanding |

Trang 14

Abstract ¬ ¬ mm ¬—.ƠƠ i

- ` oe “ : ae

Acknowledgment i ee ee 4 POOP em meee ee Ree re een ewe sae ee eoton teed ‘waved

v ` `

List of Tables Se ee ee ea a ẽ r.ố ố.ố COR e eee eee ee ree eee VỊ

Chapter One: Education and Fertility: “A Panel Data Analysis for Middle Eastern

Countries ¬ BH H2 ve ràng ¬¬ 1

I, introduction ———- "` " " "— H

IL Theoretical Background Lune ee Caen ee UAE EAE EE EE EEE E EAE RG EDGE SEE SEER RSENS EEE EES Tu kh nh cky 5 Ill Theoretical Model: Fertility _ Thu ya ¬ "_

TV Methodology 2.0 cee eee cence eee hen TK TH ch tà tà tà T2 hườn § V Data Analysis ¬— ""— ees Thun gà casi ¬ eee ee eee es 12 VỊ, Empirical Resulis beens ` :

VIL Conelusion chư, _ TỐ Hộ nh teer-ea veces s17

Chapter Two: A Macro Economic Analysis of Child Labor

in Sub-Saharan Countries "= ¬ ¬——— havens Vy n nha ¬ 20

L introduction tàu ¬ ¬ _ _—— 20

I Theoretical Background veces Thẻ seutuanaanasarnarsectacecneestsfenes _ 22 HH Methodology and Data Analysis ¬— L2 v2 kg " ¬ v ` = IV Empirical Reslts 2.22 so ¬— " LH k ng 2k ng quy 33

V, Conclusion "—— Trà, ¬ _.-

Trang 16

Chapter Three: Urbanization in the Middle East and North Africa During Post-Oil Period and Impacts of Location of Higher Education Institution and Human Capital 37

I Introduction ¬ ¬— —— sce "¬ 37

H Literature R€VÍEW ào " HH vn trơn ¬ 39

HT Theoretical Model " the HT nghệ gen th 22k KH ky tre .42

IV Location of Univetsities, so oiướn th kg ¬ nhàn 44

V Methodology and Data Analysis ¬ sọ "— a severe "—— 50

Trang 18

LIST OF TABLES

_ Chapter Ï

Table 1.1, Summary Statistics by Country: avcrage values over 1980-1999 12

Table 1.2 Panel Data Estimates (Dependent Variable: Fertilify) 15

_ Chapter2 _ cóc |

Table 2.1 Income and Education in Ghana canes veacecnecesasess Vy xa nhờn 25 |

Table 2.2 Child Labor Participation Rate in Ivory Coast " ch ng 25

Table 2.3 Urban versus Rural in Cote )ì) ky 28

Table 2.4 Children's ‘Time Allocation in Botswana (%) ceeneueaeceueceess mm 28 Table 2.5 Panel Data Estimates Dependent Variables: Child Labor (%) re 35

Chapter 3 s

Table 3.1 Industrialization and Urbanization ¬ 4i Table 3.2 Location of Universifies ín Saudi Arabia c2 46 Table 3.3 Location of Universities 1n lran "¬— nh yk 47 : Table 3.4, Location of Universities in Morocco ¬ ¬ Tn ng gue 48

Table 3.5 Location of State Universities in Ilinois ¬ 49 —— Table 3.6 Average Values of Variables Between 1980-1997 in | MENA | 33 Table 3.7 Panel data Estimates Dependent Variable: Urban Population (%) 56

Table 3.8 Panel Data Estimates (Dependent Variable: Urban Population (%) with

: : : 2

lagged vu€§) cuc cà " ĐN ng ĐH TK ng kế TT ch nà tà nh tk vờ 38

Trang 20

CHAPTER 1

TITLE: EDUCATION AND FERTILITY: A PANEL DATA ANALYSIS FOR MIDDLE EASTERN COUNTRIES

1 Introduction

Research on fertility is limited for Middle Eastern (ME) countries This paper

aims to investigate the relationship between fertility and education (by gender and levels), while controlling for other factors in ME

Solow (1956) argues that low population growth leads to higher long-run income

in a neo-classical framework Barro (1991) and Mankiw et al (1992) report that high

fertility rates are associated with low economic growth in a cross-country regression of

either the level or the growth of GDP

| Increasing human capital through education is one way that has been suggested to lower

fertility, Becker et al (1990) state that high returns of human capital are reasons for the negative relationship between fertility and growth According to them, human capital is

embodied knowledge and skills, and economic development depends on advancement in

technological and scientific knowledge Development depends on the accumulation of

human capital Higher fertility of the present generation increases the discount on per

capita future consumption Therefore higher fertility discourages investments in both human and physical capital Families prefer having few children, and provide cach child with a high level of human capital The high level of human capital also leads to a high

Trang 22

productive in producing goods than more is having children, Any change that increases

the cost of raising children tends to reduce fertility and to increase desired saving per person In effect, people shift from saving in the form of children to saving in the form of

physical and human capital

_ Gallor and Weil (1996) employ three stages to explain the negative relationship

between fertility and growth According to their theory, in the first stage, an increase in capital per worker raises women's relative wages since capital is more complementary to women’s labor input than is men's Second increasing women’s relative wages reduces,

fertility by 1 increasing # the opportunity cost of children more e than household i income And third, lower fertility raises the level of capital p per worker A rapid decline in fertility is accompanied b by aoocleraed output growth Therefore, according to them, fertility and growth have a causal relationship Brander and Dowrick (1991) also state that

investment, fertility, and income growth form an interactive dynamic system An initial

| negative shock to fertility can have positive effects on investment and income leadin gio

a further decline in fertility, reinforcing i income and investment growth until anew steady

state is reached Zhang (1997) claims that an increase of number of children leads to a

reduction in parent's time used to produce goods and hence to a decline in income per

| capita However, an increase in the education: subsidy lowers the cost of education relative to the cost of providing for children As a result, decreases i in fertility increase | ‘human capital and promote growth On the other hand, the negative relationship between ˆ

female education and fertility do not generally exist and the previous studies are subject

Trang 24

_ The above studies point to reducing fertility as one way to promote economic growth and suggest that education is one mechanism to reduce fertility: One region where

this could be particularly important is the Middle East, which has experienced very high

fertility and population growth 1 For instance, when we compare OECD countries and Middle Eastern countries, the first & striking result is thất the lowest fertility ratio of Middle

Eastern, 2.96 in Israel, 1 is higher than the highest fertility ratio of OECD, 2.51 in Ireland

(World Bank, 2001) Female labor market participation ratio in the OECD is two times higher the average of the female ratio in the Middle East In female secondary education enrollment, almost all OECD countries reached 100%, but in Middle Eastern countries

only half of women may be enrolled in secondary education There has-also been some intra-country research examining fertility and education in Middle East countries as well as other developing countries More education, especially among women, can lead to higher wages and so toa higher opportunity cost of having children (but it might also

promote use of contraception.) In Turkey, Remez (1998) found that the number of

children per family is significantly related to education of women In Iran, Salehi-Isfahani (2000) argues that reducing fertility depends on an educated generation of of parents: and hi gh returns of human capital, The infant mortality rate experienced by women with no

schooling i is 2.5 times the rate among \ women with higher education (Saiehi-isiihani

2000) His research shows that age at first marriage rose from 18.9 among women with

no formal schooling to 24.7 among women with a higher education 39% of women with hi gher education and 26% of those without formal schooling used a modern contraceptive

Trang 26

method Martin and Juarez (1995) investigating fertility in Latin America came to the

conclusion that even though the desired number of child en is the same (between 2 and 3)

for all women regardl ess of ther level of education, contraceptive usage Varies

significantly Since total fertility rate is more than 6 for uneducated women and less than 3 for women with over 10 yeats of education, the authors conclude that the main

difference comes from contraceptive use, In Kuwait, illiterate women use contraception

| methods less frequently than educated women (Shah, Makhdoom A et al, 1998) Moreover, the ideal family size ‘of w women with n no schooling is significantly larger than

that of those with some education

This paper considers education and fertility in ME countries As stated fertility is high in these countries and is considered to be a problem for the future (Salehi ‘Isfahan ;

2000) Also, there is diversity in this region but the sample is not as heterogeneous as using all developing countries This paper also examines fertility from a national

perspective, as countries are the units of observation Therefore, the focus of this study is

on what national characteristics matter for fertility This does not imply that sub-national factors are not important, only that those factors are outside the scope of this

ệXanunation |

This paper 1S organized as follows A theoretical background is given in section 20

and a model ig presented in section 3 Section 4 presents the empirical methodology | Section 5 and section 6 analyze the data and presents empirical results Section 7

Trang 28

2 Theoretical Background

Malthus was the first to mention the link between education and fertility The

delay in marriage due to school attendance is central to Malthus’ preventive checks The

basic idea is that people spending more years in school get married iater and have less children (Grabowski and Shields, 2000) Another influence of education comes from the fact that educated women use contraceptive methods more consciously

Ben Porath (1973) states that people with more education may perceive life style

changes earlier, are able to form more realistic expectations, and therefore form a view of their true optimum earlier than others One more impact of education on fertility is that the educated women tend to join the labor market in a larger number than uneducated | women Hence, education could be associated with more time women spend outside the family (Ben Porath, 1973)

Caldwell (1982) in his theory of ‘wealth transfer’ analyzes how fertility is

affected when the economy moves from traditional production towards modem production In this transition process individuals have to undergo transformations, central being the achievement of a higher level of education and skills that allow them to be employed in the modern sector A more dynamic, more competitive environment requires some adaptation costs (effort, time, and income) In order to ensure children’s success in the new, more challenging, socioeconomic environment, parents choose to invest more on children, especially in their education | | |

This is also ‘similar to the <quantity-quality choice’ argument This theory 1s

Trang 30

6

similar to investing in a durable good; parents choose a higher cost for their children (i.e to devote more time and income to raise a child) in an effort to increase the ‘quality’ of their children

An interesting view is also provided by Leibenstein (1957) He tries to explain the

parents’ utility/disutility gain with respect to the so called ‘marginal child’ In making the

‘next child’ decision, parents weight the marginal utility,U, and disutility, D,, they may

get from raising one more child Both utility and disutility are finctions of income, y, and

the number of children, n Leibentein (1957) also assumes | the following: aaa >0 and ~ <Q The main source of utility related to the ‘next child’ comes

_ 3y oy

from the child as income producer and old age insurance As the society modernizes its

economic institutions or parents’ indome increases, the role of the child as income

producer and as old age insurance decreases and so does the utility parents get from raising the ‘next child’ This strengthens those norms in ME countries according to which

parents value their children’s success as educated people in the second period of their

lives Thus, parents choose to keep their children in school for a Íonger period of time and

hence spend more in children’s education Accordingly, the utility of the ‘next child’ in _ the Leibenstein sense is decreasing while the disutility is increasing since parents face |

greater expenditures for each child As a result parents choose to have less but more

educated children, | |

Basu (2002) argues that gender equality and female education are two main ways to lower fertihty Gender equality refers to women’s control over resources and their own

Trang 32

-educated women have greater reproductive autonofily than un-educated women Educated woman tend to marry men who sharé their reproductive preferences

3 Theoretical Model: Fertility

In this model, parents decide to have a certain number of children In addition to

any emotional benefits that children provide, children are also viewed as social insurance

for parents in their old age (see Nugent (1985), for a list of characteristics associated with

using children as a source of retirement income.) Having children lowers income in the

present due to the opportunity cost of foregone wages that raising children creates, On the

other hand, more children can raise income for the parents when they are old and less able to work, This “retirement” income for parents increases with the children’s

education since more education leads to higher wages when the children become adults

_ More formally, let Uly,z) denote utility for the parents (taken together) where y is

current income and z is retirement income Current income is given by: y=fim ,where f

đenotes current income of the father and mm denotes current income of the mother

Children are not ‘assiined to contribute to the current income of the household The

“number of children, n, lowers f due to the time that the mother must stay at home to raise

children but does not affect m Retirement income is given by: z=g(n,h,j) where h denotes

the average hurian capital across male children and | j denotes average human capital

Trang 34

8

increasing with enrollment rates in education for both boys and girls, respectively Both

are taken to be exogenous The terms h and j are represented separately in g(*,*,*) since males and females might have different earning power even with the same human capital

leveis |

Therefore, there is a tradeoff when a family decides how many children to have

An increase in n lowers current income, y, but raises retirement income, z An increase in h or j has two effects on n One, this raises retirement incontie given n and provides

incentives to have more children This is a substitution effect Two, the potential to have

more income when retired given any n means that parents might choose to have fewer children and so lose less income when young This is an income effect Whether an

_ increase in h or j raises ot lowers n depends on which effect is greater —

As a special case, suppose j=0 because girls do not attend school Then n needs to be high to secure a retirement income because parents can only rely on sons’ income in the future

4 Methodology

Pampel (1993) estimates reduced form models of fertility with pooled data from

1951 to 1986 for 18 high-income nations Jeon and Shields (2002) estimate reduced form models of fertility with pooled data from 1975 to 1999 for 23 high-income nations

Trang 36

(13) Win = 0G † BXuut t WXq¿k HU

Fertility is the dependent variable (yi) The independent variables are secondary and | primary education for females and males (X1it, Xait, Xan, X4ir), tertiary education (Xsi),

female labor force participation rate (Xøi), Hinear (X;ig, and quadratic terms (Xgir) of the natural logs of real per capita income adjusted for purchasing power parity, the infant mortality rate (x9), and the percentage of urban population (x t0i) as independent

| variables | |

The fertility rate refers to the number of births per woman, Education variables

are measured im terms of level (primary, secondary and tertiary) and gender

(male/female) GDP per capita based on purchasing power parity (PPP) is gross domestic : product converted to international dollars using purchasing powet parity rates Female

labor force is the percentage of female population aged 1 5-64, Infant mortality rate is.the number of infants dying before reaching five year of age per 1,000 live births in a given year Urban population is the share of the total population living in areas defined as urban All data is from World Bank Development Indicators (2001)

GDP per capita, women’s participation rate, and urbanization’ control for opportunities of women (and men) and determine the returns to education when adults

Trang 38

10

areas have almost one birth more than those in urban areas (5.0 births vs 4.2) (Salehi-

| Isfahani, 2000) Moreover, the urban population might have greater access to schools

Another socio-economic factor possibly associated, with fertility i is infant mortality High infant mortality causes high fertility since parents will i increase the fertility rate to secure the desired number of children In Iran, the infant mortality rate experienced by women

with no schooling is 2.5 times more than the rate among women with higher education A possible weakness in my specification i is that female education may: increase

_ female labor force participation (Pampel, 1993 Teon and Shields, 2002) On the other hand, the standard of the literature is to include female Jabor participation into the mode]

ˆ (Pampel, 1993 Jeon and Shields, 2002) _

‘The weakness of GDP per capita is that | have tried to control for how modern the — society is but this is not done perfectly Some societies that provide more opportunities for females, both women and girls, will allow women more choices in the labor force and SO less time producing babies while still educating young girls In such a situation, _ enrolment is not a casual factor with fertility but only an associated one Another

possible weakness is measurement errors of GDP pet capita in developing countries: |

| Moreover, I do not lag the enrollment rate because parents take into account the education of their current children when deciding whether to have additional children

Nevertheless, if the education of the mother is what is relevant in determining the number -

of children then past enrollment rates (when the mothers were children) are what is

relevant Moreover, enrollment rates could be hi ghly correlated with current human

Trang 40

i]

the mothers If so raising the current enrollment rate will not lower fertility for a number

of years ,

I set up four different models số as to consider different educational levels and genders Model | starts with female secondary education Model 2 adds male secondary education This modei helps us to distinguish gender impacts in secondary education

_ Model 3 includes tertiary education, and model 4 includes primary female and male

education |

| The expected result based on developed countries and other developing countries

are that education, labor participation, infant mortality, and urbanization are negatively correlated (Pampel (1993), Jeon and Shields (2002), Remez Π991), Salahi-Isfahani (2000), and Martin and Juarez (1995))

We set up a null hypothesis to test the significance of group effects using the first of the above four models The null hypothesis is that intercept terms are the same For

testing this, we use the F test by acquiring the residuals from the restricted and

unrestricted specifications of model 1 The sum of squares of the restricted regression is

42.953 and of the unrestricted regression is 9.748 The F test statistic is 85, We may

conclude that the fixed effect model is more appropriate than the common intercept

model (OLS) We may use White Heteroskedasticity with cross terms to test

heteroscedasticity The F-statistic of White test is 7.75 and 18 statistically significant We

| may conclude that heteroskedasticity exists in our sample data We may tackle the |