The implications of private tutoring on the school education in LDCs

In many LDCs, we observe that the public school teachers receive low wages, expend less than their full effort at school, and provide private tutoring to the students for a fee. To capture this institutional arrangement, we develop a theoretical model which shows that in comparison with 'no-tutoring', 'tutoring' is welfare reducing for all students in the economy. However, if the government considers only the students in the public system, then 'tutoring' can be welfare improving. In that case, the government would set a lower tax rate to pay wages to the teachers and let them provide tutoring to the students for a fee.