The Effects of Education on Farmer Productivity in Rural Ethiopia

The Ethiopian education system is characterised by extremely low participation rates, particularly in rural areas. This paper challenges the hypothesis that demand for schooling in rural Ethiopia is constrained by the traditional nature of farm technology and lack of visible benefits of schooling in terms of farmer productivity. The effects of schooling upon farmer productivity and efficiency are examined employing both average production functions and two-stage stochastic frontier production functions. Data drawn from a large household survey conducted in 1994 were used to estimate internal and external benefits of schooling in 14 cerealproducing villages. Empirical analyses reveal substantial internal (private) benefits of schooling for farmer productivity, particularly in terms of efficiency gains. However, a threshold effect is identified: at least four years of primary schooling are required to have a significant effect upon farm productivity. Evidence of strong external (social) benefits of schooling was also uncovered, suggesting that there may be considerable opportunities to take advantage of external benefits of schooling in terms of increased farm productivity if school enrolments in rural areas are increased. Acknowledgements The UK Department for International Development (DFID) supports policies, programmes and projects to promote international development. DFID provided funds for this study as part of that objective but the views and opinions expressed are those of the author alone. The author is indebted to John Knight for supervision of this work. Andre Croppenstedt generously provided his set of farm variables and advice on frontier estimation. Useful comments on drafts of this paper were contributed by Simon Appleton and participants at two CSAE seminars. Any errors are the author’s responsibility. JEL Classification: I21, J24, 015, Q12