Impact on Education: Three years after application, results showed no significant differences in school enrollment between lottery winners and losers, with most applicants still in school. However, lottery winners were 15 percentage points more likely to have attended private school, had completed an average 0.1 more years of schooling, and were about 10 percentage points more likely to have finished 8th grade, primarily because they repeated fewer grades. Lottery winners also scored on average 0.2 standard deviations higher on standardized tests, relative to lottery users.
Impact on Economic Returns: Analysis of the economic returns to the additional schooling attained by winners after three years of participating in the program suggests that the benefits from increased income greatly exceeded the tuition costs to families and the government. Annual earnings of parents in the sample were about US$2,400 per worker, and PACES applicants should be able to earn more, since the average parent had only 5.9 years of education while the average applicant had already completed 7.5 years and was still in school at the time of the survey. It can therefore be assumed that the expected earnings of applicants are US$3,000. Thus, PACES seems very likely to raise lottery winners’ wages by US$36 per year, and might raise wages by as much as US$300 per year if higher test scores have a grade-equivalent payoff.
Long-Term Effects: Seven years after the initial lottery, researchers examined administrative records on registration and test scores from a government college entrance examination. Lottery winners were more likely to take the university entrance exam, a good predictor of high school graduation since 90 percent of all high school graduates take the exam. Estimates suggest the PACES program increased high school graduation rates by 5 to 7 percentage points, relative to a base of 25 to 30 percent.
1 PROBE Team. Public report on basic education in India. Oxford: Oxford University Press, 1999.
Glewwe, Paul, Michael Kremer, and Sylvie Moulin. “Textbooks and Test Scores: Evidence from a Prospective Evaluation in Kenya.” Mimeo, Harvard University, September 2000.