Economics of Education

Transcript

1. Economic Education 1 Sener Salci Department of Economics – Queen’s University sener.salci@gmail.com / ssalci@econ.queensu.ca
2. Outline of Talk 1.  Introduction 2.  Economics of Education Key Issues (in the context of less and developing world countries) 3.  Economic Evaluation of Education Projects: Cost- Benefit Analysis Approach (math) 2
3. Introduction •  Human capital: Education and Health •  Returns to education are substantial and larger in poor countries than in rich countries (Psacharopoulos and Patrinos, 2002) •  Positive (and high) correlation between educational attainment and productivity hence economic growth (Barro 1991; Barro and Salai Martin, 1995; Bils and Klenow, 2002) •  Increase in the relative price of teachers in poor countries, or in countries with low education levels, tend to raise the wages paid to educated people (Banerjee, 2004) 3
4. 4 Table 2. Returns to Investment in Education by Level, Latest Available Year (percent) Country Primary Secondary Higher Argentina 8.4 7.1 7.6 Bolivia 9.3 7.3 13.1 Botswana 42 41 15 Brazil 35.6 5.1 21.4 Chile 8.1 11.1 14 Colombia 20 11.4 14 Costa Rica 11.2 14.4 9 Ecuador 14.7 12.7 9.9 El Salvador 16.4 13.3 8 Ethiopia 20.3 18.7 9.7 Ghana 18 13 16.5 Mexico 19 9.6 12.9 South Africa 22.1 17.7 11.8 Philippines 13.3 8.9 10.5 Zimbabwe 11.2 47.6 -4.3 Introduction Returns to Investment in Education by Level, Latest Available Year (%)
5. 5 Introduction Source: Psacharopoulos G., and Patrinos, H.A. (2002, p.15)
6. Introduction •  Full returns of schooling take into account the variation in the cost of schooling and years of schooling. •  Direct cost of education increase with level of schooling. •  There are many other forms of societal benefits including crime reduction, social cohesion, income distribution, possibly fertility reduction (Haveman and Wolfe, 1984), but it is either difficult to monetize them or these benefits cannot be attributed to education alone / response of these benefits to education (?) •  Children, if they are kept away from school and work, earn less than adults. 6
7. Key Issues •  What are the way(s) to SEND children to school? •  How can we KEEP children at school? 7
8. What are the way(s) to SEND children to school? •  Randomized trial in rural Mexico in which approximately 500 communities are assigned experiment and control group (Schultz, 2004) –  Conditional cash transfer programs –  School enrollment increase considerably by 3.6% in the communities that are part of the program –  Highest enrollment in primary and secondary school age children, and larger positive impact on girls –  Outcome: Financial incentives [conditional] in the form of ‘cash’ works 8
9. How can we KEEP children at school? •  Randomized trial in rural Kenya in which 14 schools are selected for the experiment Kremer, Moulin and Namunyu (2003) –  NGO provided uniforms, textbooks, and classroom construction to seven schools randomly –  Dropouts fell considerably by 15% in the schools that received the program –  Outcome: Financial incentives in the form of free uniforms, textbooks increase in participation. 9
10. Social and Private Rate of Return on Education - LAC Private and social rate of return on education, including LAC countries, by degree and gender is available from Psacharopoulos and Patrinos (2002). http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/ 2002/09/27/000094946_02091705491654/Rendered/PDF/multi0page.pdf Banerjee and Duflo (2005) update data in their investigation of whether the return to schooling is higher in poorer countries. http://www.sciencedirect.com/science/article/pii/S1574068405010075 Learning Materials and Projects, visit J-PAL at https://www.povertyactionlab.org/education 10
11. Assessing Feasibility of a higher education project using Rate of Return and CBA Framework: Case of Mauritius (Ref. Pedro Belli, 1998) Note: Numbers are replicated from the study, however, the numerical results are slightly different than presented by Belli (1998). 11
12. Evaluation •  Full returns of schooling take into account the variation in the cost of schooling and years of schooling. •  Direct cost of education increase with level of schooling, and tuition fees vary across departments (Economics, Law, Commerce etc.) and years of schooling (e.g. Economics: 3 years, Law: 6 years, in Canada). •  Annual incremental costs and incremental benefits are discounted to arrive their net present values as of today. •  Private returns and societal returns are not the same. 12
13. Age-Earnings Profiles of High School and University Graduates Source: Belli, 2001. Remark: Heterogeneity in costs and benefits, therefore net returns on education among graduates. 13
14. Age-Earnings Profiles of High School and University Graduates 14
15. Feasibility of Higher Education Project in Mauritius 15
16. a. Social cost-benefit earning profile from Engineering Degree b. Private cost-benefit earning profile from Engineering Degree Rate of Return from Education Private vs. Societal 16
17. Results from Rate of Return from Education Private vs. Societal Discount Rate: 10% 17
18. Distribution of Benefits/Costs from Higher Education Project 18
19. Results from CBA Analysis 19