Professional Documents
Culture Documents
Economics of Education
Economics of Education
George Psacharopoulos
Athens University
August 28, 2008
Outline
¾ Theoretical highlights
¾ Empirical evidence
¾ Policy practice
¾ Open questions
Macro instigators
Abramovitz Y= f(K, L, R)
Micro theorists
Mincer W = f(S, EX)
gy = sl gl + (Ip/Y)rp + (lh/Y) rh
Earnings/
productivity
More educated
+++++
-- Less educated
Age
Earnings
$ University
graduate
++++++
++++++
Secondary school
graduate
--
--
--
0
18 -- 22 Age
(W W )
∑ (1 + r ) = ∑ (W C u ) (1 + r )
43 4
Becker, Hansen, Blaug u
−
s t t
t +
s
t =1 t =1 t
r = …..
ln Wi = α + βSi + γ 1 EX i + γ 2 EX i + ε i
2
Mincer
β = ∂ ln W ≈ r
∂S
Macro
Reduced residual
Micro
Mincerian r ≈ 10%
Beckerian r ≈ 5% to 30%
% 16
14
12
10
8
6
4
2
0
y
K
n
SA
a
lia
ce
an
pa
ai
re
U
ra
an
U
Sp
m
Ko
Ja
st
Fr
er
Au
27 %
19 %
17 %
10%
%
12
10 %
10 9%
4
2
0
Men Women
George Psacharopoulos - 10 -
Higher returns in developing countries
%
12 11 %
10
7%
8
0
Industrial Developing
George Psacharopoulos - 11 -
Higher returns to general education
%
14
12 %
12 10 %
10
8
6
4
2
0
General Vocational
George Psacharopoulos - 12 -
Higher returns in the private sector
%
12 11 %
10 9%
0
Private Public
George Psacharopoulos - 13 -
Rising higher education returns
(% points change in 15 years)
% points
2 +2
1.5
1
0.5
Primary
0
Higher
-0.5
-1
-1.5
-2
-2.5 -2
George Psacharopoulos - 14 -
Private and social returns
World Averages
30% 27%
25%
19% 19%
20% 17%
13% Private
15% 11% Social
10%
5%
0%
Primary Secondary Higher
George Psacharopoulos - 15 -
Private returns properties
¾ Undisputable
¾ Universal, global
¾ Explaining behavior
¾ Analyzing distribution effects
George Psacharopoulos - 16 -
Social returns for policy
George Psacharopoulos - 17 -
Narrow vs. wide social returns
George Psacharopoulos - 18 -
1970s - The debates
Ability
Productivity
∂ Rice
β = ∂ Rice
∂ S
β=
β = ∂ Rice
∂ S
Farmers’ education ∂S
George Psacharopoulos - 19 -
1980s …… 1990s
Second generation macro
-
Theory: Lucas, Romer
} Y = S f(K, L, S)
S = g(Y)
George Psacharopoulos - 20 -
2000 – The wider social effects
Tax revenues
Welfare payments
Health
Crime
Civic
Happiness ☺
George Psacharopoulos - 21 -
Wider social benefits
(High school completion vs. dropping out)
George Psacharopoulos - 22 -
Preschool benefit-cost ratios
George Psacharopoulos - 23 -
Heckman’s grand summary
Preschool
Returns
School
10%
Job training
6 25 Age
George Psacharopoulos - 24 -
Enter quality
- Quality?
George Psacharopoulos - 25 -
Education quality indicators
George Psacharopoulos - 26 -
Education production functions
∂ (Achievement)
· = β textbooks
∂ (Textbooks)
β textbooks
Cost-effectiveness =
Cost of textbooks
George Psacharopoulos - 27 -
Macro quality effects
¾ Measured by output (learning), not input (spending)
George Psacharopoulos - 28 -
The institutional setting
560
540
UK
520 AUS FR
DK
SWE
Achievement inMat
IRL
500
USA GER
480 SP
460 IT
POR
GR
440
0 10 20 30 40 50 60 70 80 90 100
Central Decision Making (% )
George Psacharopoulos - 29 -
Enter equity
George Psacharopoulos - 30 -
Who benefits from public funding?
Appropriation of public funding for education by the poorest and the richest in
Ghana, 1992 (%)
Quintile
Education Level 1 5
Primary 22 14
Secondary 15 19
Tertiary 6 45
George Psacharopoulos - 31 -
Enter values
Max SW = (Y/P)
α (1- Gini)β
α & β values????
George Psacharopoulos - 32 -
Education policy history
George Psacharopoulos - 33 -
Policy implications
George Psacharopoulos - 34 -
Evolution of lending for education
Ed % of total Bank lending
20
George Psacharopoulos - 35 -
Level composition of education lending
% of total education lending
Primary
Tertiary
George Psacharopoulos - 36 -
Vocational composition of education lending
% of total education lending
General
Vocational
George Psacharopoulos - 37 -
Material composition of education lending
% of total education lending
Software inputs
George Psacharopoulos - 38 -
International Organizations
¾Unesco
¾UNICEF
¾UNDP
¾World Bank
¾ILO
¾OECD
¾European Union
George Psacharopoulos - 39 -
European university problems
· Museum pieces
George Psacharopoulos - 40 -
Private share of tertiary education financing
100%
United States
Australia, Japan
.
Most of continental Europe
0%
George Psacharopoulos - 41 -
Outlook
George Psacharopoulos - 42 -
A major contradiction
George Psacharopoulos - 43 -
EU university circa 2010
Italian University circa 1350
George Psacharopoulos - 44 -