Chapter 8

Chapter 8

Education

Norton Media Library

Dwight H. PerkinsSteven Radelet

David L. Lindauer

Chapter 8: Perkins, et al text• 1.Trends and Patterns

– Stocks and Flows – Boys versus Girls – Schools versus Education

• 2.The Benefits of Education – Education as an Investment – Internal Rates of Return to Schooling – Estimated Rates of Return – Controversies and Puzzles

• 3.Making Schooling More Productive – Underinvestment – Misallocation – Improving Schools – Reducing the Costs of Going to School – Inefficient Use of Resources – It’s About More than the Money

Chapter 8: Education: Learning Objectives

• After reading the chapter, you ought to understand and be able to explain:• The concept of investment in human capital and its contribution to growth. • Why governments in developing countries have accorded high priority to

investment in education. • The main trends and characteristics of education in developing countries. • The limits of translating increased education into increased development. • The recent results from randomized trials in education. • How the private rate of return can diverge from the social rate of return to

education and the implications of this divergence for education policy. • The range of critiques and proposals for reforming education policy in

developing countries. •

Introduction

• Education is a form of Human Capital

• Economist T.W. Schultz underscored the critical role of human capital investment in the form of education for development

Trends and Patterns

• Stocks and Flows: Stock is amount of schooling embodied in a population

• Flows: Net change in those flows as a result of enrollment

• Gross enrollment rates have risen many parts of the world at various levels

• Net enrollment rates are enrollments of those relevant age

Schooling versus Education

• There is a gap between rich and poor nations in educational quality

• Learning Outcomes also vary (see figure 8.3)

The Benefits of Education

• Education is an Investment

• Education is a human capital investment

• Internal Rates of Return to Schooling

• Estimated Rates of Return

Benefits of Education

• Present Value (PV) of all costs and benefits

• PVb= Sum of the present value of all future private benefits (see 8.1)

• PVc= Present value of all anticipated private costs (see 8.2)

• Internal Rate of Return is the rate or (r ) that which equates $PVb=$ PVc ( see formula 8.3)

Education is a “public good”

• Education is a public good with a positive externalities

• The Privates sector or markets will under produce education if left to themselves.

• The fact that Education has a positive externalities justified public provision or subsidy of education.

Social and Private Rate Returns to Education

• There is a difference between private and social rate of return to education for countries which depends on the level of income

• See figure 8.3 next for the relative rates of return of education at Primary, Secondary & College levels for low, Middle, & High Income countries

• What is level of education has the lowest & highest return in LICs?

Chapter 8 Education- Summary

• I. Stocks refer to the total amount of schooling in a population, flows refer to the net change in those stocks. Educational data such as gross enrollment rates, net enrollment rates, and grade survival rates are presented for different regions. Further division into boys and girls clearly indicates the gender differences. Finally, a distinction is drawn between schooling and education, that is, the capabilities individuals acquire from time spent studying and learning.

• II. The use of cost-benefit analysis in education planning is treated in more detail. The text charts Nicaraguan age-earnings profiles for men and women separately and for differences among no education, primary, secondary, and tertiary levels. The chapter then explains the divergence between private and social rates of return to education, and implications for education policy. Empirical studies indicate that rates of return on education are generally high in developing countries, especially for basic literacy.

• The chapter also explains why cost-benefit analysis and rate-of-return computations cannot be used mechanically as tools for planning educational investments.

End Chapter 8

This concludes the Norton Media LibrarySlide Set for Chapter 8

W. W. Norton & CompanyIndependent and Employee-Owned

Economics ofDevelopment

SIXTH EDITION

ByDwight H. Perkins

Steven RadeletDavid L. Lindauer