Can Schooling Reduce Vulnerability to Economic Shocks? Evidence from Nigerian Microdata

Abstract

This study examines the impact of individual schooling attainment on well-defined vulnerability indicators of individuals’ expectation of future economic wellbeing, and frequency of access to food, water, healthcare, cooking fuel and cash in the past one year. OLS estimates, after correcting for a large number of potentially confounding variables, suggest that a year of schooling attainment raises expectation of better future by 0.29 percentage point and reduces the possibility that a household will be without food by 0.56 percentage point, water by 0.36, healthcare by 0.68, cooking fuel by 0.39 and income by 0.49. These estimates are significant at 1 percent. Formal tests of omitted variables suggest that unobserved variables are not likely to be driving outcomes. Since individual schooling attainment variable is obviously endogenous and is measured with error, we complement with OLS technique with Two-Stage Least Squares (2SLS) identification strategy. 2SLS estimates suggest that schooling attainment increases individual’s expectation of future economic wellbeing and reduce the possibility that individual household will be without food, water, healthcare, cooking fuel and cash. The 2SLS estimates show that a year of schooling increases the prospect of better economic wellbeing by 0.59 percentage point and reduces the likelihood of being without food, water, healthcare, cooking fuel and income by 0.71, 1.7, 1.3, 1.3 and 1.3 percentage point respectively. Chosen instruments are apparently strong and exogenous going by the outcomes of instrument strength and over-identification tests. Schooling and vulnerability relationship is mediated by the fact that the educated tends to have greater access to news media, and the educated could mount more pressure on governments to provide public goods in their localities.