Do Government Incentives Improve Educational Outcomes? Evidence from India

Low levels of learning outcomes persist among schoolchildren in low- and middle-income countries, despite the focus on increased access to education. This study examines the impact of two government incentives—scholarships and free tuition—on the educational outcomes of children aged 8–11 years in India using the nationally representative dataset, India Human and Development Survey-2 (IHDS 2). To estimate the effect of government incentives on children’s learning outcomes, we use propensity score weighting, with the treatment being free tuition and scholarships. Our findings indicate that scholarships are negatively associated with learning outcomes, particularly in writing and math. However, these effects are not statistically significant when controlling for socio-economic and school-related factors. Similarly, free tuition is linked to lower learning outcomes, and the negative effects increase after accounting for control variables and could reflect pre-existing deprivations or learning gaps that remain to be addressed. These findings highlight the mixed impacts of government incentives on education outcomes in India. The study also emphasises the importance of socio-economic factors and school characteristics in shaping learning outcomes, highlighting the need for a multifaceted approach when evaluating the effectiveness of government incentives. JEL Codes: I21, I24, I28