Abstract
Several authors have identified an externality accruing to proximate illiterates, that is, illiterate people with access to a literate person. The standard literacy rate ignores this externality; measures of effective literacy are sensitive to it. Nearly all measures of effective literacy appearing in the literature are greater than or equal to R . In fact, the best known of these, the Basu–Foster measure L ∗ , is strictly greater in virtually every case (see Basu and Foster [Basu, Kaushik, Foster, James, 1998. On measuring literacy. Economic Journal 108 (451), 1733–1749]). Although the inequality L ∗ ≥ R is an unintended consequence of their construction, it amounts to setting a benchmark for the effective literacy rate. This note examines Basu and Foster’s framework and offers an alternative benchmark.
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