Abstract 2 Standard benefit-incidence analysis assumes that the subsidy and the quality of educational services are the same for all income deciles. This is a strong assumption that has the tendency to minimize the distributional inequity within educational levels. This paper uses a new approach, which prevents this drawback. The marginal willingness to pay analysis measures the government’s provision for public schools effect on the educational spending behavior of an average household. In analyzing the impact of public spending on household behavior, this paper focuses on the following questions: What would an average household h with a given set of characteristics (Xh) willing to spend on an individual child i with traits (Xc), if subsidized public education facilities were not available? What would the household have “saved ” by sending the child to public schools instead of private schools? How large are these “savings ” for various income groups? Which are the determinants for enrollment by income groups and location? How do individuals ’ educational expenditures affect enrollment patterns? Among some of the most interesting findings that this paper shows are: i) the non-poor and those in urban areas get a large share of the subsidy or "savings " from the government provision of educational services. ii) The valuation for private educational services is higher for the wealthy as compared to for th
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