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The Impact of Income on Educational Investment

Investment in educational human capital in developing countries may be studied using Becker´s framework for the demand and supply of human capital. The demand represents the present discounted value of benefits (labour market earnings), and the supply represents the present discounted costs of education (school fees, travel costs, opportunity costs in terms of foregone earnings).There are several points attached to the issue of demand that are important. Earnings possibilities are affected by labour market conditions faced differentially by individuals, for example, male worker may face greater opportunity of work and higher wages than female workers (Mazumdar, 1989). The demand for education is not only determined by productivity and income associated with schooling, but in many cases schooling of children is affected by the individual characteristics of students such as ability, motivation, and family background interacting with each other (Behrman, 1990). Poverty of the households plays an important role in perpetuating low motivations and low demand for education.