Abstract
While an important share of the rural population in Sub-Saharan Africa owns a non-farm enterprise (NFE), it is unclear how these businesses, especially among female owners, contribute to rural development. This study investigates the missing link between rural NFEs and children's education using nationally representative data for Ghana. After controlling for observed and (partially for) unobserved heterogeneity, using OLS and instrumental variable regressions with instruments that are highly relevant and plausibly exogenous, we find that secondary schooling is significantly higher among children whose mother engages in non-farm entrepreneurship. We find a significant positive correlation with Junior High School enrolment but not with Senior High School enrolment, which relates to lower expenses and a better spread in payment for Junior High School education. The link of mother's non-farm entrepreneurship with child secondary education is equally strong for boys and girls and for high- and low-educated mothers, and stronger for poorer households. While most of NFEs are small-scale and informal, our findings suggest that even these businesses can contribute to development. The results furthermore imply that NFEs entail the potential to stimulate child schooling among children of low-educated and poor mothers and thereby reduce inequality in rural education.
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