The Price And Income Elasticity Of Demand For Education In Ghana: Empirical Evidence From Household Level Data

ABSTRACT Ghana government recognizes the importance of education on social outcomes such as growth, poverty, health, productivity, population growth, among others things, through Human Capital Theory introduced by Becker in 1964. At the household level, price of education and household income are factors household consider in demanding education. In view of that, this study seeks to estimate the sensitivity of household demand for each level of education in Ghana with respect to price of education and household income. To achieve this, the thesis adopted the Quadratic Almost Ideal Demand System (QUAIDS) model and the Two- Stage Budgeting process factoring a limited number of household demographic factors to analyze household price and income elasticity of demand for education in Ghana. The study found that, education at each level is a normal necessity good in Ghana, the demand of which an increase in household income raises household demand for education. The study found that Ghanaian households are more income elastic to demand for Basic education. With respect to price effects, the study found that, household demand for all levels of education was price inelastic and demand for education was more price elastic as one moves from basic to secondary education. Notwithstanding, the price elasticities estimated are quite high suggesting that, Ghanaian households are burdened with extra education cost aside the regular school fees they pay. Most especially, the study found that rural household demand for secondary education was more price and income elastic than urban households. These results are relevant for policy formulation and implications for stakeholders. The study recommends that government should standardize all school fees across all education level in the country whiles eliminating unapproved fees charged by school managers. Also government should consider improving the incomes of household that are financially unstable through entrepreneurship to enable parents make enough money to spend on their children’s education. The study further recommends that Government should institute merit scholarship program for rural households especially young girls