Income Risk and Schooling Outcomes in Burkina Faso

48 Pages Posted: 29 Dec 2005  

Harounan Kazianga

Oklahoma State University - Stillwater

Date Written: January 2006

Abstract

There is a large literature which explores how negative income shocks impact human capital accumulation (especially education) when financial markets are incomplete and households can neither insure nor borrow to smooth their consumption. The main conclusion is that households in these circumstances allocate child time to more labor and to less schooling. Such ex-post use of child time as a self-insurance mechanism translates into lower human capital (lower years of education completed) over time which is detrimental to economic growth. There has been, however, little research on the cumulative effects of (perceived) income uncertainty on child education. The intuition is that households that face more a volatile income stream have greater incentives to build up a buffer stock to insure against unforeseen adverse shocks, and non-enrollment can be part of such strategy. This paper fills this gap on the literature which focuses on income shocks and education in developing countries. The empirical work uses data from rural Burkina Faso, an environment where school enrollment rates are low and households face frequent income shocks. Controlling for current economic shocks, household wealth levels and child characteristics, I find that income uncertainty (expressed as income variance) consistently reduces a number of education outcomes, including current enrollment status, education expenditures per child, the number of years of education completed and the probability of having been ever enrolled. The estimation results suggest that income uncertainty might have large welfare costs in terms of human capital.

Keywords: human capital, education, income risk

JEL Classification: D99, I21, O15

Suggested Citation

Kazianga, Harounan, Income Risk and Schooling Outcomes in Burkina Faso (January 2006). Available at SSRN: https://ssrn.com/abstract=872575 or http://dx.doi.org/10.2139/ssrn.872575

Harounan Kazianga (Contact Author)

Oklahoma State University - Stillwater ( email )

Stillwater, OK 74078-0555
United States

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