As we indicated in the text, the idea of opportunity cost is one of the fundamental concepts in economics. When we look at the choices people make in the area of employment and education, the role of opportunity cost is especially large. Recent work looking at the effect of rainfall on children’s education in India highlights the role that opportunity cost can play.

Much of India is still rural and dependent on agriculture. Most adults, both male and female, are engaged in agriculture, and in most families the children also play a role in agricultural production. Irrigation is uncommon, especially in the poorer areas of India, and as a result agricultural production is highly dependent on rainfall. When rains are unusually plentiful, not only are harvests larger, but the gains from having people work the land increase. In a drought there is very little a farm worker can do to increase yields, and there is little produce to harvest. It follows then that when rains are unusually plentiful in an area, the opportunity cost of having someone out of the labor force increases.

Think for a moment about families with children, choosing between sending them to school, which would make them more productive in their later life, or sending them to the fields to help with the current harvest. The opportunity cost of sending your children to school is the loss in current agricultural output. If there have been ample rains, that opportunity cost is high. In a drought, the cost is low.

It follows from this opportunity cost differential that one would expect fewer children at school when the rains have been plentiful in rural India than in a drought. This is precisely what Shah and Steinberg find. Using data from more than 2 million children ages 5–16 across rural India, these economists find that an unusually high rainfall reduces school   enrollments by a significant amount. And, unsurprisingly, these children end up with significantly lower math scores on tests administered by the state. You should be able to see the power of the concept of opportunity cost. In this example, it allows us to see the effect of rainfall on rural math scores.

Question

For urban children in India, work opportunities are few. What would you expect to see happen to the urban-rural gap in test scores in high rainfall periods?

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