School dropout and overeducation in developing economies: Feasibility of a budgetary solution†

Sayoree Gooptu and Vivekananda Mukherjee

Review of Development Economics, 2023, vol. 27, issue 2, 825-852

Abstract: High rates of school dropout and overeducation are typical problems faced by developing economies. This paper addresses these issues in a unique theoretical model that accounts for complementarity between household and infrastructural investment in education production function on the one hand, and school and higher education on the other hand. The results derived in this paper show that a reallocation of the education budget in favor of school education can solve both problems at the same time if certain conditions are satisfied. Otherwise, reallocation aggravates the problems. This paper questions the efficacy of the widely practiced budget reallocation policy in favor of school education, and in turn, shows that reallocation cannot eliminate school dropouts.

Date: 2023
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