OECD (2000)

B1
Educational Expenditure Relative to Gross Domestic Product
POLICY CONTEXT
This indicator provides
a measure of the relative
proportion of a nation’s
wealth that is invested
in educational
institutions, its origin
and its destination.
It also includes
a comparative review
of changes
in educational
investment over time.
Expenditure on education is an investment that can help to foster
economic growth, enhance productivity, contribute to personal and social
development, and reduce social inequality. The proportion of total financial
resources devoted to education is one of the key choices made in each country,
an aggregate choice made by governments, heads of enterprises, and individual
students and their families. So long as the social and private returns on that
investment are sufficiently large, there is an incentive for enrolment to expand
and total investment to increase.
In appraising how much they spend on education, governments have to
interpret demands for increased spending in areas such as teachers’ salaries and
educational facilities and to assess how effectively existing resources are being
utilised. Although this indicator cannot answer these questions directly, it
provides a point of reference as to how the volume of educational spending,
relative to the size of national wealth, has evolved over time in various countries.
EVIDENCE AND EXPLANATIONS
Overall investment relative to GDP
As a whole, OECD
countries spend
6.1 per cent
of their combined GDP
in support
of their educational
institutions.
All OECD countries invest a substantial proportion of national resources in
education. Taking into account both public and private sources of funds, OECD
countries as a whole spend 6.1 per cent of their collective GDP in support of their
educational institutions. Under current conditions of tight constraints on public
budgets, such a large spending item is subject to close scrutiny by governments
looking for ways to reduce or limit the growth of expenditure. In only four out of
23 reporting OECD countries (Greece, Italy, Japan, and the Netherlands) is less
than 5 per cent of GDP spent on educational institutions (Chart B1.1).
If direct public expenditure, funds from international sources and all
public subsidies to students and households are taken into account, then the
proportion of GDP spent on education in OECD countries rises to above 8 per
cent of GDP in Denmark and Sweden, and to between 6.5 and 8 per cent in
Austria, Canada, Finland, and the United States; it remains below 5 per cent in
Greece and Italy.
Many factors influence the relative position of countries on this measure.
For example, high-expenditure countries may be enrolling larger numbers of
students while low-expenditure countries may either be very efficient in
delivering education or be limiting access to higher levels of education; the
distribution of enrolments between sectors and fields of study may differ, as
may the duration of studies; and the scale and organisation of linked research
activities may vary.
Changes in overall educational spending between 1990 and 1996
In seven out of nine
OECD countries, public
and private investment
in education increased
between 1990
and 1996...
In seven out of the nine countries for which comparable trend data are
available, public and private investment in education has increased
between 1990 and 1996 in real terms (Table B1.2). The increase in Australia,
Denmark and Spain amounted to over 20 per cent, and in Ireland to over 40 per
cent. On the other hand, spending in Finland and Hungary was lower in 1996
than in 1990. The trend is similar if only public investment is considered: direct
© OECD 2000
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