The effect of experience and environment in private tutoring on human capital investment

Abstract This study investigated how experience and the environment of private tutoring impact investment in human capital, utilizing panel data from Korea. We scrutinized the effects of past private tutoring expenditures and the local tutoring landscape on decisions regarding private tutoring expenditures. To mitigate potential selection bias, we employed Heckman's selection model, revealing a significant correlation between substantial past spending on private tutoring, competitive environments, and increased future investment. Notably, at the middle and high school levels, individuals who had experienced high private tutoring expenses and those situated in environments with elevated private tutoring expenditures surpassed those who had not. The findings indicate that substantial past private tutoring expenditures, coupled with highly competitive environments, may lower the current consumption baseline and elevate future benchmarks. This implies the potential emergence of a vicious cycle that could ensnare families by escalating educational costs.