Abstract/Summary

This article reassesses the debate over the role of education in farm production in Bangladesh using a large dataset on rice producing households from 141 villages. Average and stochastic production frontier functions are estimated to ascertain the effect of education on productivity and efficiency. A full set of proxies for farm education stock variables are incorporated to investigate the ‘internal’ as well as ‘external’ returns to education. The external effect is investigated in the context of rural neighbourhoods. Our analysis reveals that in addition to raising rice productivity and boosting potential output, household education significantly reduces production inefficiencies. However, we are unable to find any evidence of the externality benefit of schooling – neighbour's education does not matter in farm production. We discuss the implication of these findings for rural education programmes in Bangladesh.