The willingness to pay for education in developing countries. Evidence from rural Peru

Citing low price elasticities of demand for schooling, some economists have recently advocated increasing school fees to raise revenue for educational improvements in developing countries. But elasticities alone are not enough - one must estimate the willingness to pay for schooling improvements to see whether higher fees are in fact desirable. Using a rigorous model of the demand for schooling, we calculate willingness to pay for new secondary schools in rural Peru. We find that rural Peruvian households at all income levels are indeed willing to pay fees high enough to cover the operating costs of new schools in their villages.