Is Literacy Shared within Households? Theory and Evidence from Bangladesh

Abstract

A member of a collective-action household may or may not share the benefits of literacy with others in that household; the shared gains from doing so may well be offset by a shift in the balance of power within the family. Using household survey data for Bangladesh we find strong external effects of education on individual earnings. Holding a range of personal attributes constant, an illiterate adult earns significantly more in the non-farm economy when living in a family with at least one literate member. These effects are strongest, and most robust, for women. Omitted-variable bias cannot be ruled out, but would also be consistent with an intra-household externality of literacy.

Keywords: Household behavior, literacy, externalities, earnings, Bangladesh

JEL Classification: D10, J24, J31