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retention rates among poor as well as female students?. Since disparity in enrollment and survival in basic education occurs across region, gender and ethnic minority, the means of targeting above subsidies should be based on geographic region that is the so-called 8- 7 poverty counties, gender and ethnic minority.

**_Improving_** _Quality:_ To increase the private benefits of basic education among the poor its quality must be improved. One indication of quality gap is the variation across income levels in the amount of private spending on public schooling, much of which is devoted to such quality-enhancing inputs as textbooks. Given our regression analysis finding that government expenditure tends to improve survival prospects among students the central government should seek to allocate more resources for teachers' training, textbooks and other classroom materials in poorer areas. In this respect, schools should be targeted, because high dropouts, repetition and low achievement scores are more prevalent in poorer regions, serving low-income households.

_Special Measures:_ The government should also consider relocating schools closer to communities, changing the content of curricula, and recruiting more female teachers from local community to augment girls' participation and enable them to continue successive grades in a particular education cycle. Cross-country evidence of a strong and positive association between girls' enrollment and female teachers are abound, and evidence for China will be available when Bank- financed projects are completed.<sup>8</sup>

**Secondary Education:** Enrollment and survival rates in secondary education are lower in China than in other Asian countries at similar income levels. Our analysis suggest that this is mainly due to the lack of demand stemming from cultural factors rather than the lack of spaces. But the dynamics of China's new labor market should increase demand for secondary school graduates, necessitating some forms of governmental interventions. Although the present policy of 9-year compulsory education that extends the junior secondary level does enhance coverage, yet additional intervention via financial incentives for school attendance covering direct and foregone earnings particularly in less developed areas would be needed with the caveat that this incentive could be reversed when further justification no longer applies 9. Currently, the underlying assumption for such intervention is not inconsistent with the empirical findings of transition rates from primary to junior secondary education. But empirical support for higher government subsidy for senior secondary education to promote attendance and stimulate survival prospects is apparently weak. However, this conclusion does not nullify the case for more narrowly targeted subsidy and financial incentives such as scholarships for poor but meritorious students in senior secondary education.

7See, Shaikh I. Hossain, "Education Finance: Public Private Interface" (mimeo), Paper Presented at the National Institute of Educational Policy, New Delhi, India, 1995 8G. Psacharopoulos and H.A. Tzannatos 1992, "Case Studies on Women's Employment and Pay in Latin America" Regional and Sectoral Study, World Bank, Washington D.C 9Malaysia and Sri Lanka incorporated reversibility in their compensation design. The specific circumstances justifying their initial introduction did not continue when attendance and cohort survival rates improved markedly.