Access and use of financial markets for basic education expenses

Kristiano Raccanello,Laura Elena Carrillo Cubillas,Mariana Guzmán Yerena

doi:10.1016/j.cya.2016.03.003

Abstract

As a result of the financial crisis of 2008, the macroeconomic adjustment has affected Mexican homes through greater unemployment and a drop in purchasing power. Moreover, families had to keep financing education costs, sometimes going into debt in the formal or informal financial market. The hypothesis of this article proposes that the access and use of formal and informal financial products makes it possible to reduce financial problems associated to education expenses at the basic education levels. The probit model is estimated with a sample comprised of four hundred homes in the municipality of San Pedro Cholula (state of Puebla). The results indicate that a worsening in the work conditions and the loss of employment are associated to a greater probability of facing financial difficulties. Likewise, the access to the formal financial market allows reducing the probability of facing these difficulties, whereas for the informal market the results are a function of the characteristics of each financial intermediary.

Highlights

Background informationEducation can be considered in different ways: i) as a consumer good that provides a benefit for the individuals without having any type of incidence in productivity; ii) as a means to help identify and grade skills and abilities; or iii) as a means to increase human capital (Carrillo, 2006) which, in turn, is considered a productive factor given the relation between the knowledge level of the workers and their capacity to use them and by extension, their productivity (Serrano, 1996)
The levels of education of both parents were included in the model, only those of the mother are associated to the problems regarding the payment of education. With regard to those of them who have a university degree, these problems are verified with a higher probability (11.9%) in the cases where the mothers have a middle level of education, probably due to a deficient management of resources
According to the results of this work, since the financial and unemployment crisis, households that have access to the formal financial market manage to significantly reduce their problems to cover the costs of education

Summary

Introduction

Education can be considered in different ways: i) as a consumer good that provides a benefit for the individuals without having any type of incidence in productivity; ii) as a means to help identify and grade skills and abilities; or iii) as a means to increase human capital (Carrillo, 2006) which, in turn, is considered a productive factor given the relation between the knowledge level of the workers and their capacity to use them and by extension, their productivity (Serrano, 1996) According to this last perspective, the education cost is an investment that generates better living conditions for the individual that receives it. It is observed that the people in households with a lower income study fewer years and under worse conditions than those with higher income (Hochschild & Scovronick, 2004)

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Conclusion