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Journal of African Economies Advance Access originally published online on September 14, 2006
Journal of African Economies 2007 16(1):134-165; doi:10.1093/jae/ejl026
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Right arrow I11 - Analysis of Health Care Markets
Right arrow I21 - Analysis of Education
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© The author 2006. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Production Externalities of Education: Evidence from Rural Ethiopia1

Sharada Weira,* and John Knightb

a Centre for Health Policy and Research, University of Massachusetts Medical School
b Centre for the Study of African Economies, University of Oxford

* Corresponding author: CHPR/UMMS, 222 Maple Avenue, Shrewsbury, MA 01545, USA; e-mail: sharada.weir{at}umassmed.edu

Schooling has externality effects in agriculture when, in the course of conducting their own private economic activities, educated farmers raise the productivity of their uneducated neighbours. This paper seeks to determine the potential size and source of such benefits for rural areas of Ethiopia, where school enrolment is low and the private returns to education may not be apparent. Average and stochastic frontier production functions are estimated, including household and community education, as explanatory variables to measure the productivity and efficiency of farmers. In each case, internal and external returns to schooling are compared. We find substantial and significant externality benefits of education in increasing average production and shifting out the frontier. External benefits of schooling may be several times as high as internal benefits in this regard. However, we are unable to find evidence that technical efficiency is subject to externality effects. Our results suggest that adoption and diffusion of innovations that push out the frontier is the source of externalities to schooling.

JEL classification: I11 • O12 • O13 • Q12


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