Measuring the Economic Output of the Education Sector in the ...

74). The five education levels are defined as follows: 0−8 years of schooling; some or
completed high school; some or completed postsecondary school below bachelor’s degree;
bachelor’s degree; and master’s degree or above. For the cost-based approach, enrolments are
disaggregated into three education levels (primary and secondary, college, and university) as a
result of the availability of data on education expenditures. 6
While the two approaches yield similar estimates of the growth in real education output, they
produce very different estimates of the level of education output (Chart 6). The income-based
estimate of the nominal value of education services was about 6.8 times as large as the costbased
estimate in 2005.
Chart 6
Ratio of income-based to cost-based estimates of the nominal value of
education services in Canada
ratio
16
14
12
10
8
6
4
2
0
1976 1980 1984 1988 1992 1996 2000 2004
Ratio of investment in education to costs of education
Source: Statistics Canada, authors' calculations.
The relative levels of the two estimates of education output in Chart 6 can be interpreted as the
ratio of the economic benefits of education to the costs of education. That ratio declined from
1976 to the mid-1980s. It remained virtually unchanged from the mid-1980s to 2000, and
declined again after 2000. This suggests that the return to education declined from 1976 to the
mid-1980s; it declined again post 2000, following a period of little change from the mid-1980s to
2000. This is consistent with the findings on the trends in the rate of return to education in
Canada (Emery 2004). Emery examined the rate of return to undergraduate university
education for the period from 1960 to 2000 and observed reductions in returns to university
education in the late 1970s and early 1980s; by 1985, the returns to education had resumed the
levels of the 1960s and early 1970s.
6. The difference between weighted and un-weighted school enrolment estimates reflects the compositional shift
between types of students. As the un-weighted school enrolment declined at 0.6% per year from 1976 to 1986,
the composition shift was an increase of 0.6% per year for the cost-based output estimate and it was an increase
of 1.2% per year for the income-based estimate for that period. The larger composition shift in the income-based
estimate reflects the effect of large decline in enrolment in primary education in that period that is captured in the
income-based estimate, but not in the cost-based estimate that does not have primary education as a separate
education category,
Economic Analysis Research Paper Series - 26 - Statistics Canada – Catalogue no.11F0027M, no. 080