This paper investigates the correlates of household welfare in urban Ethiopia with an emphasis on the impact of education. We use household panel data collected between 1994 and 1997. Welfare is approximated by household income. Although non-educated households are found in all income quintiles, education has a significant effect on household welfare. The effect of education is reduced when parental background is introduced as an explanatory variable, indicating that parents ’ education has an effect on the quality of children’s education. If all main income earners were given at least primary education, average household income would increase by nearly 3 per cent. Female-led households with many children would be among the prime beneficiaries of this
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