Nexus of education and poverty in Africa: Evidence from Sierra Leone

We analyse the relevance of education to poverty reduction in Africa with evidence from one of the least developed countries on the continent, Sierra Leone, based on the country’s integrated household survey 2011. The analysis is carried out within the human capital investment model leading us to employing two-level simultaneous equation estimations. The first conducts a three-stage least squares (3SLS) where we look at the interaction of poverty not only with education as a critical component of human capital for poverty reduction, but also health investment as another key human capital component. On the second level, we estimate a two-equation simultaneous system of poverty headcount (as a dichotomous endogenous variable) and years of schooling of household head (as a continuous endogenous variable) within a two-stage probit least squares framework enabling us to predict poverty reduction or increase (in headcount) with education and other household socio-economic conditions. This study find education as a lead (and perhaps the most important) predictor of poverty at both rural and urban levels, suggesting that the state should devote a substantial share of the national budget towards education. Reversibly, poverty as measured in headcount itself has a substantial impact on education with a huge feedback effect. The paper notes policies could have a negative direct impact on welfare in the short run even though perceived effective currently, but with potential long run positive effects which this paper traces through indirect effects of the covariates, lending further credence to the system approach employed; it enables perusal of direct and indirect interaction of variables. We note an inevitability of policy trade-offs with the simultaneous decision making problems a poor household faces, necessitating a reduction in health spending in favour of child education, for instance, and vice versa. Thus, careful state public policy decision making is critical to ensuring an optimal balance of effects on household numerous welfare decision making problems. There is also a call for effective population management along with any other policy implemented including education.