International Remittances and Private Schooling: Evidence from Kerala, India
| Date | 01 February 2018 |
| Published date | 01 February 2018 |
| Author | M. Imran Khan,C. Valatheeswaran |
| DOI | http://doi.org/10.1111/imig.12413 |
International Remittances and Private
Schooling: Evidence from Kerala, India
C. Valatheeswaran* and M. Imran Khan*
ABSTRACT
This study investigates the impact of international remittances on private school enrolment in
Kerala. Using data from the 2010 Kerala Migration Survey and employing an instrumental
variable (IV-Probit) approach to address the endogeneity of migration, we found that remit-
tances have a positive and significant effect on private school enrolment. After disaggregating
the sample into different heterogeneous groups, we found that remittances have greater effect
on boys, children residing in rural areas, and those belonging to socially advantageous groups
and from higher wealth quintile. Children from lower wealth quintile and belonging to socially
disadvantageous groups are least affected by migration and remittances.
1. INTRODUCTION
The inflow of international remittances to India has been increasing dramatically over the past two
decades, making India the highest remittance receiving country in the world. India received an
amount of US $ 71 billion as remittances in 2014 and the figure accounts for nearly 3 per cent of
the country’s gross domestic product (World Bank, 2015). International remittances mitigate India’s
merchandise trade deficit to a large extent, thus keeping the current account deficit at a modest
level since the 1990s (Gupta, 2006). It was also less volatile in relation to other capital flows, such
as foreign direct investment and portfolio investment, even during the global financial crisis.
Though India receives the highest amount of remittances, it is not highly dependent on remittances.
However, the remittances are concentrated in certain states and have a very significant impact on
regional economies. Among the Indian states, Kerala is the top remittance receiving state and
received INR 497 billion in 2011, which constituted 31.2 per cent of the Net State Domestic Pro-
duct (NSDP) (Zachariah and Rajan, 2010). Kerala is the second largest remittance dependent econ-
omy in the world, after Tajikistan (World Bank, 2011). Moreover, the proportion of households
receiving international remittances in Kerala increased from 12.2 per cent in 1993 to 16.3 per cent
in 2007-08 (Tumbe, 2011). This indicates that remittances have become an important external
income source not only for the economy, but also for remittance receiving households. Remittances
provide direct financial support to families and relax budget constraints, leading to increased levels
of household consumption expenditure and investment patterns. If remittances are not merely spent
on basic consumption at the household level but are invested in human capital (i.e. children’s edu-
cation and health), then it will have a positive effect on economic growth.
Meanwhile, the state government was unable to spend more on the education sector due to
increasing fiscal deficit in the budget during the past two decades. The percentage share of educa-
tional expenditure in the gross state domestic product (GSDP) drastically declined from 6.2 per cent
* Centre for Development Studies, Trivandrum
doi: 10.1111/imig.12413
©2017 The Authors
International Migration ©2017 IOM
International Migration Vol. 56 (1) 2018
ISSN 0020-7985Published by John Wiley & Sons Ltd.
in 1990-91 to 2.5 per cent in 2014-15 (Government of Kerala, 2017). The lack of governemnt
expenditure on education prevented the government from expanding the capacity of government-
and private-aided (PA) schools
1
when the demand for these schools was increasing. The vacuum
created by the withdrawal of the state government has been filled by the private unaided (PUA)
schools, which are run for commercial purpose. Studies that have analysed the quality differentials
among schools in India have shown that the PUA schools provide better education than that pro-
vided by government and PA schools (Kingdon, 1996; Desai et al., 2008; Chudgar, 2012; Karo-
pady, 2014; Singh, 2015). Although teachers in government and PA schools are relatively well
trained and experienced, this is not translated into improving the quality of education in those
schools. Moreover, the PUA schools use English as the medium of instruction and are taught from
class 1, while government and PA schools use the vernacular medium (Malayalam) until class 10
and start using English only from class 4. This gives an advantage to the PUA schools, as parents
want to see their children learning English from the very beginning. As a result, the demand for
education in PUA schools has increased among the parents in Kerala (Narayan, 2010). Studies
found that remittances, along with growth in per-capita state domestic product (SDP), expansion of
job markets both within India and abroad, and decrease in fertility, have played a significant role in
parents’ability to pay for the private education of their children (Retnakumar et al., 2006; Kumar
and George, 2009).
The major constraint to accessing education, not only in PUA schools but also in government
and PA schools, is its cost. Both government and PA schools do not charge fees at the lower-pri-
mary level, but minimum tuition fees are charged at the upper primary and high school level. At
the same time, in the PUA schools, parents need to pay for all expenses (registration fees, dona-
tions, tuition fees, private tuition, uniform, textbooks, notebooks, transportation, cultural pro-
grammes and educational tours) which may place a high economic burden on households,
especially low- and middle-income households. The NSSO 2015 report on education shows that
the average per-capita household expenditure on school education increased from INR 3,367 in
2007-08 to INR 8,916 in 2014. Existing studies have shown that schooling investment is con-
strained by inadequate credit and insurance markets (Kajisa and Palanichamy, 2010). Though
returns to educational investment is very high, households are unable to invest more resources into
children’s education as households do not have sufficient funds and further, unable to borrow
money to finance children education. This indicates that households’educational investment is vul-
nerable to negative income shocks. Against this backdrop, this study investigates the effect of
remittances on the choice of children’s schooling between private and government schools in Ker-
ala.
Theoretical studies suggest that migration of household members causes adult children to work
in the local labour market to compensate for the household income that is forgone in the short-run
due to the migration of the earning member of the household. In addition, children may have less
time for schooling if parental migration increases their domestic workload, which includes activities
such as looking after younger siblings, cooking, cleaning and other domestic chores (Giannelli and
Mangiavacchi, 2010; Hu, 2012). The absence of parents due to migration also reduces parental sup-
port for acquiring education. Children have less time for schooling which will adversely affect
school attendance (Robles and Oropesa, 2011; Cortes, 2015). On the other hand, migrant remit-
tances can alleviate budget constraints in the receiving households and increases the allocation of
resources towards children’s education (Stark and Bloom, 1985; Taylor, 1999). Moreover, if
migrant remittances increase household income, households may be less likely to rely on the addi-
tional income generated from children’s market or non-market work. As a result, children would
have more time to attend school (Bansak and Chezum, 2009). Similarly, remittances may raise the
reservation wages of household members left behind, including children, which would reduce child
labour (Calero et al., 2009). Remittances can also lead to a shift in enrolment from public to pri-
vate schools, where the parents believe their children will get quality education. The cost of
128 Valatheeswaran and Khan
©2017 The Authors. International Migration ©2017 IOM
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