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This paper explores the inclusion of spatial dependency in measuring the impact of geographically targeted programs. Using an education program in India, which targeted educationally backward districts, I study the influence of the program on the change in the rural female literacy rate and the gender gap in the literacy rate. In the estimation of a non-spatial model, the residuals exhibit spatial dependency, and the data suggests the spatial error model or the spatial Durbin error model (SDEM) as the appropriate specification. According to the SDEM estimates, with a one percentage point increase in the educational backwardness of a district, there was a 0.08 percentage point increase in the rural female literacy rate and a 0.02 percentage point decrease in the gender gap in literacy rate. The results imply a small but insignificant influence of the program received by the neighboring districts on the change in rural female literacy rate of a district. Limited financial flexibility and the lack of incentive to engage in a competition is a possible explanation for the absence of strategic interaction between districts.

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