Abstract
In this paper we develop a two-strata general-equilibrium model of human capital acquisition with endogenous school construction that permits an assessment of the relative impacts of technological change and school availability on schooling investments in landless and landed households and illuminates how these choices interact through the adult and child labor markets. A key distinction is made between changes in current levels of agricultural productivity, which directly affect the demand for labor in both landless and landed households, and changes in expected agricultural technology, which only affect the contemporaneous schooling decisions and thus the labor supply of landed children. The implications of the model are assessed using a household-level panel data set which constitutes a representative sample of rural India during the peak period of agricultural innovation associated with the green revolution, 1968-1982. We establish that land prices capitalize expected future technologies and use the spatial and temporal variation in land prices to determine how household schooling decisions by land status are influenced by expected technological change. We find that higher expected future technology and increases in the number of schools, for given current productivity, raise schooling in landed households. However, although increased school availability also increases schooling in landless households we find that, consistent with the operation of a child labor market, high rates of expected technology for given school availability and for given current agricultural productivity tends to substantially decrease schooling investment in landless households.
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