Empirical evidence of education spillovers in developing countries and rural contexts is scarce and focuses on specific channels. The purpose of this paper is to provide evidence of such spillovers in rural India, by evaluating the overall impact of neighbours' education on farm productivity.
The author uses cross‐sectional data from the India Human Development Survey of 2005. Spatial econometric tools are used to take into account social distance between neighbours. To be sure that the author's definition of a neighbourhood does not drive the results, three different definitions of neighbours were tested.
The results show that education spillovers are substantial: one additional year in the mean level of education of neighbours increases households' farm productivity by 2 per cent. These findings are robust to changes in specification.
The results open the way to further research. In particular, this paper does not explore the channels through which this spillover effect happens.
This paper confirms the choice of improving education in developing countries: giving a child education will certainly provide him/her with greater revenues and it may also provide his/her neighbours with greater revenues. The paper shows the importance for policy makers of taking into account education spillovers and policies' complementarity when facing political trade‐offs.
This paper is one of the few to underline that education externalities do not only exist in urban contexts and education spillovers do not only occur between workers of the manufacturing and service sectors. There are also spillovers in sectors considered as more traditional, such as agriculture.
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