it is easier to ward off premature death than morbidity, the associated improvement to **d** 2 = (0 _._ 015 _,_ 0 _._ 03 _,_ 0 _._ 06) in period 2 is a bit less dramatic than that in mortality.

# **3.3 Setting up the sequence under perfect foresight**

The system must be set up in such a way that it satisfies two requirements. First, the household must choose a plan that is in keeping with what we observe in the present. The key variable here is the level of investment in education, _e_ 1. Children in India’s rural areas typically start school at 6 years of age and complete about 6 years of schooling on average. Hence, with up to 12 years of schooling available, and noting that morbidity reduces the endowment of productive time, the model must be set up so as to yield (1 + _τ_ ) _e_<sup>0</sup> 1<sup>= (6</sup><sup>_/_12)(1</sup><sup>_−d_1</sup> 1<sup>).A furtheradjustmentis neededfor the</sup> number of days lost due to bad weather, especially in the monsoon. The Orissa survey yields an estimated 8.6 and 9.4 days a year, on average, for primary- and secondaryschool children, respectively, involuntary absences that were mainly attributable to their teachers’ failure to arrive (Bell and van Dillen, 2011). Assuming a school year of 180 days, the required condition becomes (1 + _τ_ ) _e_<sup>0</sup> 1<sup>=(1</sup><sup>_−_9</sup><sup>_/_180)(6</sup><sup>_/_12)(1</sup><sup>_−d_1</sup> 1<sup>)=</sup> (19 _/_ 40)(1 _− d_<sup>1</sup> 1<sup>),where</sup><sup>_τ_= 0</sup><sup>_._08and</sup><sup>_d_1</sup> 1<sup>= 0</sup><sup>_._02.</sup> Secondly, the whole sequence must be anchored to some plausible configuration in the future. In this connection, there is much talk of meeting the so-called Millennium Development Goals by 2015, and suchlike. Let us suppose, therefore, that a full education for all is attainable within one complete generation, where the definition of a ‘full education’ must make a full allowance for the claims on a child’s time made by illness, traveling to school and other involuntary absences. That is to say, the model must be set up such that parents in period 2 do choose _e_<sup>0</sup> 2<sup>=</sup><sup>_e_ ̄2= 0</sup><sup>_._95(1</sup><sup>_−d_1</sup> 2<sup>)</sup><sup>_/_(1 +</sup><sup>_τ_).</sup> If the general environment described by **Z** _t_ does not deteriorate thereafter, it will then follow that _e_<sup>0</sup> _t_<sup>=</sup><sup>_e_ ̄</sup><sup>_t_=0</sup><sup>_._95(1</sup><sup>_−d_1</sup> _t_<sup>)</sup><sup>_/_(1 +</sup><sup>_τ_)</sup><sup>_∀t≥_3.Foronce</sup><sup>_e_0</sup> _t_<sup>=0</sup><sup>_._95(1</sup><sup>_−d_1</sup> _t_<sup>)</sup><sup>_/_(1 +</sup><sup>_τ_)</sup> is attained, the young adults in that period can then be certain that all future generations will continue this policy, with its corresponding effects on their consumption in old age, as formulated in (15). The desired anchoring of the system will have been accomplished.

The simplest way of ensuring all this where **Z** _t_ is concerned is to impose stationarity from period 2 onwards. On the assumption that fertility will fall to replacement levels by 2030, and allowing for premature mortality among adults, let **N** _t_ = (2 _,_ 2 _,_ 1 _._ 5) _∀t ≥_ 2. Also stationary are prices, tastes and costs, a road being built, if at all, at the start 15