Primary Education in West Bengal – A Case of Moral Hazard

There has been a gross inefficiency in the delivery of primary education in the developing countries like India and the situation has continued to remain so for a long time. Though there has been political willingness in recent times to correct the imbalance the situation continues to be grim. One possible reason for this can be that stakeholders are not sufficiently empowered so that effective intervention on their part is not forthcoming. Also it may be possible that adverse incentives on part of the agents are creating a moral hazard problem which is perpetuating this inefficiency. In India the problem is more serious as an overwhelming majority of people has to depend on state run education system where education is a social good and normal market principles are quite ineffective here. The paper tries to look at the problem from the stakeholders’ point of view. With the help of some game theoretic tools we build up a model accompanied by some empirical evidences in support of the model where we try to understand the whole matter in a Principal-Agent framework.