Heterogeneous Effects on Private Education Spending in Latent Groups in Korea

Abstract

This study examines people's response to well-known determinants in private education spending (PES). Based on the Korean Education Longitudinal Study, we divided the private education decision-making process into two parts: whether to spend and how much to spend. Due to omitted environmental factors, latent subgroups that share the same PES effects were classified using a clustering methodology. Empirical analysis found that people respond differently only to household income and school year. For 40% of the observations, household income has a significant impact on PES decisions. There is no effect of household income in the other subgroups, whereas different patterns of PES according to the school year induce heterogeneity in other subgroups. There is no heterogeneity for the effects of gender, educational environment and plans to attend college.