The relationships between education, inequality, and poverty in Bangladesh have been discussed at some length. The standard view is that broad-based economic inequality is poverty. Yet, poverty may also be associated with rising inequality, which then tends to offset part of the gains from education. However, studies on the returns to education in developing countries generally indicate higher social benefits at primary level compared to secondary and tertiary levels. While social benefits for primary education are high in Bangladesh, private benefits are higher for secondary-level education than primary level. On the other hand, private costs are lower for primary education than for secondary education. Poor households in Bangladesh cannot afford to keep their children until they complete the secondary level because of high costs – both direct costs and opportunity costs. Inequality in the access to secondary education is the main cause of persistent poverty in Bangladesh. But the recent improvement of female participation rates in both primary and secondary levels confirms the favorable impact of targeted approach. Policies should be directed to both boys and girls from poor households.
Conceptual issues relating to poverty and education
The study of poverty and education is difficult not only because of the circular nature of the relationship. It is complex because poverty has many dimensions that are affected by education. Poverty signifies lack of income, and deprivation in terms of political and civil rights, voice, freedom of choice, and the quality of life based on health and education. While education is a goal in itself, it can be instrumental to poverty alleviation working not only through income but through its influence on other dimensions of poverty. There are two approaches - the human capital approach and the human development approach that both emphasize the role of education in human welfare (Tilak, J. B. G. 2001). The human capital approach (Schultz 1961; Becker 1964; Mincer 1972) focuses on the instrumental aspect of education while the human development approach takes a broader view of human welfare and relates education to different dimensions of poverty (UNDP, Sen, 1993). These two views are in no way contradictory since the human capital approach enables one see how education can be used to expand people´s choice through higher productivity and income.
The impact of education on poverty
The impact of education on poverty works through productivity of labor and other effects on the household. The effects on labor productivity are reflected in the wage rates in labor market activities, and income from self-employment. Education increases productivity and earnings potential through different channels. It enhances the ability to perform specific jobs and to search for employment opportunities, etc. It can also serve as a signaling and screening device to the employers. For self-employment, it enables the worker to acquire access to inputs, technology and market information.
The impact of poverty on educational investment
Investment in educational human capital in developing countries may be studied using Becker´s framework for the demand and supply of human capital. The demand represents the present discounted value of benefits (labor market earnings), and the supply represents the present discounted costs of education (school fees, travel costs, opportunity costs in terms of foregone earnings). There are several points attached to the issue of demand that are important. Earnings possibilities are affected by labor market conditions faced differentially by individuals, for example, male worker may face greater opportunity of work and higher wages than female workers (Mazumdar, 1989). The demand for education is not only determined by productivity and income associated with schooling, but in many cases schooling of children is affected by the individual characteristics of...