Interstate variation in household spending on education in India: Does it influence educational status?

Abstract

Household education expenditure has grown manifold over the past few years, underscores an increased demand for education and the availability of private institutions. Hitherto, studies have analyzed this trend mainly at the individual level, however, the present study examines the inter-state disparities in the spending and how it influences the educational status of India at the state level, using National Sample Survey data (1987–2014). The conceptualization of this study is anchored in the theoretical framework of Education Production Function and General Earnings Function of Mincer. Based on Instrumental Variable Regression and Generalized Method of Moments, our empirical estimates reveal that geographical location of states matters as much as income in educational attainment and household expenditure serves as a crucial input for educational attainment. Given the stark inter-state variations in educational input and output, a differential approach is essential while devising policies to tide over perpetual educational backwardness across the states.