Is literacy shared within households? Theory and evidence for Bangladesh

Abstract

A member of a collective-action households may or may not share the benefits of literacy with others in that household; the shared gains from doing so may well be offset by a shift in the balance of power within the family. Using household survey data for Bangladesh, we find strong external effects of education on individual earnings. Holding a range of personal attributes constant, an illiterate adult earns significantly more in the non-farm economy when living in a family with at least one literate member. These effects are strongest, and most robust, for women. Omitted-variable bias cannot be ruled out but would also be consistent with an intra-household externality of literacy.

Introduction

This paper asks whether an illiterate worker's labor earnings are affected by the educational attainment of other members of that worker's household. The large literature on literacy says very little about intra-household externalities of literacy and education. Yet one might well expect that one person's literacy will have spillover benefits for others within the same household. In their study of the propensity to innovate among Guatemalan farmers, Green et al. (1985) observe how having a literate family member conveys many of the benefits of being literate oneself. Likewise, Drèze and Saran (1995) note how the advantages of literacy can spread to others in the household by virtue of certain kinds of decision-making on behalf of the household shifting toward the literate.

It can be argued that an illiterate person who lives in a household in which at least one person is literate will be better off than an illiterate person who lives in a household of illiterates (Basu and Foster, 1998). For certain activities, all one needs is access to a literate person; one does not become literate this way, but it eases the handicap. For instance, an illiterate farmer who occasionally receives pamphlets from extension workers or needs to read the label on a new fertilizer packet could benefit enormously from easy access to a literate person. An urban worker whose work requires some knowledge of what is happening in the world at large or just plenty of ‘commonsense’—which comes from interacting with knowledgeable people—might benefit a lot from having a literate person at home. Of course, employers who are aware of this, will be willing to pay more for someone coming from a literate household.

What evidence is there that literacy, or education more generally, has an external effect within the family? One external effect of education within families has been well researched empirically; namely, the effect of parental education on child welfare. There is a large body of evidence indicating that children's health, nutritional status and educational attainments are enhanced by having better-educated parents, particularly the mother.¹ However, sharing knowledge with children is more obvious than among adults, which will also depend on how sharing knowledge affects other aspects of decision-making within the family.

There is also evidence that a farm–household's total income depends on the highest education level reached, rather than the mean, or the education level of the household head Foster and Rosenzweig, 1996, Yang, 1997a, Yang, 1997b. This does not, however, imply an external effect of one person's human capital on the productivity of another person within that same household—it may simply reflect gains from a division of labor within the family.

More direct tests can be found by looking at individual labor market earnings. In empirical work on earnings, it is commonly assumed that own wages depend on own characteristics and not family characteristics directly. Indeed, the exclusion restriction that such external effects on earnings do not exist has been used to test for the endogeneity of human capital in wage regressions (Aldeman et al., 1996).² However, in the US, there is evidence that men's earnings respond positively to the wife's schooling (Benham, 1974), and in Brazil, to the schooling of the wife, parents and parents-in-law (Lam and Schoeni, 1993). It is unclear whether this is a direct external effect or the outcome of marital sorting. Krishnan (1996) finds strong family background effects on public sector wages in Ethiopia, which she attributes to a selection effect, whereby family background influences access to public sector jobs; correcting for selection bias, the wage effect vanishes.

We aim here to test for external effects for both men and women in rural Bangladesh. We turn deliberately to a developing country setting in which there are large disparities in educational attainments, in the expectation that this will make it easier to identify any external effects of education. We examine the efficacy of men versus women as recipients of the externality of literacy. It is believed that women are better at generating positive externalities within the family, and there is supportive evidence.³ However, there does not appear to have been any research on whether women are better or worse as the recipients of externalities. Does the presence of a literate member in the household yield significantly greater externalities on illiterate women than on illiterate men?

Before turning to the formal analysis, we should clarify that we are staying away from the larger debate on the inter-relationship between the concepts of literacy, schooling and knowledge. These are of course distinct concepts, though sharing a common core. Once one goes into the distinctiveness of these concepts, one could argue that a minimal level of education enables a person to receive externalities better. However, these are complexities that lie beyond the scope of this paper. Here, literacy is equated with the ability to read, though we will look at the effect of different years of schooling.

We begin by examining a key theoretical question: given that a literate member can, if she so chooses, prevent others from benefiting from her literacy, why does she not do so? Moreover, could it be that men and women have different propensities to share? The following section constructs a theoretical model to answer these questions. The paper then tests for literacy sharing within households. Section 3 describes our data for Bangladesh. Section 4 describes the wage regressions that we estimate across illiterate sub-samples of the workforce, correcting for sample selectivity bias by standard means. In addition to reasonably standard variables for earnings regressions, we include measures of the highest education level in the worker's household. We stratify the regressions by gender and employment sector (subject to data limitations) in the expectation that external effects will be stronger for certain types of jobs. Section 5 presents the results, and Section 6 consists of concluding remarks. A detailed Statistical Addendum is available from the authors.