ABSTRACT
Governments all over the world, irrespective of whether developed or developing, devote substantial resources to their education sector with an eye to promoting human capital formation. Education through positive externalities promotes human capital formation, which is conducive to economic growth and the prosperity of an economy as well as having an egalitarian effect because it is likely to lower the difference in wages between the various groups of workers that are differentiated with respect to their skills. In 1995, public spending on education accounted for 15.7 per cent of total government expenditure in developing countries (see Bedi and Garg 2000). Furthermore, the majority of students in developing countries are educated in publicly funded and publicly managed educational institutions. According to Jimenez and Lockheed (1995), almost 90 per cent of all primary and 70 per cent of all secondary enrollments in developing countries are in public schools. In the public education system in the developing economies, policies like stipends, free educational goods and free midday meals have been designed to pull and retain children in school. These are likely to stimulate school attendance and retention and mitigate the problem of child labour by keeping them in school.
