ABSTRACT
The rate of return to education is gender specific. The amount of investment depends on parental preference for equity in children which affects how investments in education are allocated to children with different expected returns. This study examines the underlying reasons for households’ decision to spend on children's education and compares the level of gender inequality in education spending in rural and urban areas of West Bengal, India. The inequality in education expenditure and factors that contribute to household expenditure inequality and educational expenditure is decomposed at individual-level data to find out the sources of inequality by various observable characteristics. It reveals that there is underinvestment in girls’ schooling relative to boys. The findings also suggest that household income is the key factor determining the magnitude of household spending on education. The level of education attained, household size, and mothers’ education strongly influence household spending on education. Higher rates of women's labour force participation should protect girls from discrimination in urban areas. This is not the case in rural households, where women's participation in the labour force has a negative influence on girls’ education expenditure. The decomposition of the average difference in household spending on education shows that the proportion of the spending gap shows that only a minuscule percentage of gaps in spending is explained by its determinants and a major portion of the gap is due to discriminatory behaviour of parents.
