The demand for schooling

Use the two-period model of the schooling decision and your knowledge from this course to answer these questions.

A. Why does the ability to send migrants to urban areas increase the demand for schooling in rural areas?

B. One puzzle in many urban areas is that, despite cheap or free secondary schooling and high returns to secondary education, many teenagers choose to drop out. Urban dropouts can earn a fairly high wage (compared to rural areas), but they are foregoing large future returns by doing so. Again, using the two[1]period model, what specific factor causes teenagers to forego large future returns in favor of immediate employment? Can you suggest a policy intervention aimed at teenagers that would address this specific factor directly, i.e., not just trying to overcome it with a conditional cash transfer?