Highly subsidised public schools are the principal provider of
education in the rural areas of Pakistan. Steady growth of school age
population over time coupled with stagnant public funding has put
enormous pressure on this system. The alternative of cost recovery
through user charges has its own critics. They argue that introduction
of tuition fees would substantially reduce the already small
representation of low-income households in primary schools due to high
price elasticity of their demand for schooling. Moreover, the
revenuegenerating potential of this policy may also be limited due to
same reason. The present study uses a discrete choice random utility
model of household utility maximising behaviour to evaluate feasibility
and consequences of introducing user fees in primary schools in rural
Pakistan, particularly with reference to above criticisms. The demand
function for school enrolment derived from this model allows us to test
the hypothesis that price elasticity of demand for schooling varies with
income. It also provides estimates of the parameters of the utility
function needed for measuring parents’ willingness to pay for their
childrens’ education if money generated from tuition fees is reinvested
in education. The estimated demand function takes into account total
price of education, including opportunity cost. Estimation results show
that price elasticity of demand for school enrolment is higher for
lower-income groups. Hence school enrolment of the poorest children
would bear the main brunt of user fees policy. Children’s gender and
age, father’s education, presence of T.V. in the household, and
community variables like the presence of an elected district council
member, electricity, and public transport in the village turn out to be
significant influences on the probability of primary school enrolment.
Willingness to pay for education is lower for poorer households and can
generate revenues to cover only a fraction of the cost of running a
school. Hence the need to search for other sources of financing primary
education in rural Pakistan.