19 the agricultural productivity of their neighbors. This pattern of results rules out the possibility that the measured impact is a spurious correlation due to unobservable characteristics that have some correlations across groups. Additionally, this paper shows that spillovers are only present for wheat but not for rice, which is consistent with the fact that learning from neighbors is limited when growing conditions strongly depend on land characteristics.

These findings confirm that education externalities do not only exist in urban contexts and education spillovers do not only occur between workers of the manufacturing and service sectors. But there are also spillovers in more traditional sectors such as agriculture. Therefore, improving education in developing countries should continue to be a priority, because education has a multiplicative effect, even in rural areas. Moreover, this paper underlines that education has to be publicly financed, because social returns to education are higher than private returns. The boom of private schools in rural India cannot be a longterm solution.

Maybe even more important, the fact that the external effect of education is happening solely within social groups calls for an equality of access to education across social groups. In India, the law imposing that 25 percent of classroom seats should be reserved for children from poorer or disadvantaged families in the neighborhood is a step in that direction. More generally, affirmative action programs in favor of low castes should continue to be developed.

These findings also have implications for other developing countries, where school enrollment is low and inequality across ethnic groups is also very salient.

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