_Employment opportunities for children:_ Whether a family decides to allow a child to get additional years of schooling depends in part on the opportunity costs of education at each successive year. In general, these costs increase with the scope for employment among children of school-going age. For example, where there are many opportunities for children to be employed and it is culturally acceptable for children to work, one would expect this to decrease the desire among families to send their children to school. Thus, countries where a larger fraction of children are employed are also likely to be countries with a slower rate of improvement in education attainment.<sup>7</sup> We use the rate of child employment (among children between 7 and 14 years of age) averaged over 1970-2010 as a measure of opportunity cost.

_Urbanization_ may also serve as a proxy for opportunity cost to the extent that urbanized areas are likely to have higher school density and offer easier transportation options to get to school. Another possible role of urbanization may come from the supply side. Higher rates of urbanization allow more children to be accommodated in a given number of schools and also more schools to be built from a given budget.

The results of the regression analysis are provided in Table 4 and regional averages of the included variables are shown in Table 5.

# **Results of Regression Analysis**

The results of the estimation (see Table 4) show that the initial level of education stock in 1970 has by far the strongest effect on the attainment of education over the next four decades. The standardized coefficient for this variable is -0.73 which implies that countries with an education stock that was one standard deviation less than the sample average in 1970 increased their stocks by 73% more than the average by 2010. The negative sign on the initial level of education shows that convergence or catch-up has occurred and the “poverty trap” scenario has not played out. Countries with low initial education stocks have moved faster over time to increase their stocks compared to those with higher initial stocks.

The results also show that public spending on education is a significant and positive determinant of education attainment.<sup>8</sup> The higher the public spending on education per capita, the higher is education attainment. Food intake or health status also matters: the worse the undernourishment of the population, the smaller the improvement in education attainment. In terms of economic significance, however, the effect of initial endowment is much stronger than either of these two variables.

Opportunity costs are not statistically significant in our results: neither child employment nor urbanization is consistently significant. Per capita income growth is not significant either. The latter result is consistent with the lack of robustness for this variable in the previous literature. For example, Gupta et al. (2002) report a significant positive association between gross secondary enrollment rates

> 7 For example, Goldin and Katz (1997) show that variations in the availability and wages of manufacturing sector jobs were among the factors that explain differences in the rate of secondary school graduation among US states over the period 1910-1940.  Manufacturing sector jobs competed with the desire to spend additional years in high school at this early stage in the evolution of education in the US.

> 8 Similar results obtain in regressions using alternative measures such as the ratio of public spending on education to total budgetary spending.

8