Macro Shocks and Child Grade Attainment in Rural Pakistan 

This study attempts to investigate the effects of idiosyncratic and covariate shocks on the educational attainment of rural Pakistani children. For this purpose, we use Pakistan Rural Household Panel Survey (PRHPS-2012, round 1). The empirical evidence is reported for all children, male and female children while using the censored ordered probit model. The results show that covariate shocks are inversely affecting child grade progression for all children and gender. Conversely, the effect of idiosyncratic shocks is insignificant for these children. Covariate shocks adversely affect investment and spending decisions of many households. More importantly, it’s devastating effect is higher for girl’s (grade attainment is almost lower by 10 percent) than that of boys. These results suggest that public support should focus on mitigating the adverse effects of covariate shocks facing by households in rural Pakistani communities. Furthermore, the choice of promoting formal private insurance may not be practical in such circumstances or in the short run.