World Bank Document

this may be offset by shifts in the And in the few countries where rural areas, girls, and the poorestpattern of production toward more studies have been done at differ- urban boys. In general, primaryskill-intensive goods. In Table 5.4 ent periods, rates of return have education tends to be redistributherates of return to primary usually declined, but only mildly. tive toward the poor (see Tableeducation in countries with adult There are also favorable effects 5.5). In contrast, public expendiliteracyrates above 50 percent, on equity. As primary education ture on secondary and higherwhile somewhat below those in becomes more widespread, addi- education tends to redistributecountries with adult literacy below tional spending will be increas- income from poor to rich, since50 percent, are still strikingly high. ingly concentrated on backward children of poor parents havecomparatively little opportunityTable 5.4 Rates of return to education(percent)to benefit from it.Primary education, especially ofNumber ofCountry group Primary Secondary Higher countriesgirls, has favorable effects on thenext generation's health, fertilityAll developing countries 24.2 15.4 12.3 30 and education (see box overleaf).Low iacome/adult literacyFinally, it enriches peoples' lives.rate under 50 percent, 27.3 17.2 12.1 11Middle income/adult literacyMany would regard this as sufficirateover 50 percent 22.2 14.3 12.4 19 ent justification for universal pri-Industrialized countries .. 10.0 9.1 14 mary education, independent ofNote: In all cases, the figures are "social" rates of return: the costs include forgone earnings its other benefits.(what the students could have earned had they not been in school) as well as both publicand private outlays; the benefits are measured by income before tax. (The "private"returns to individuals exclude public costs and taxes, and are usually larger.) The studies SECONDARY AND HIGHER EDUCATION.refer to various years between 1957 and 1978, mainly in the latter half of the period. Renewed emphasis on the impora.In this sample of 30 developing countries, those countries with low incomes also had tance of primary education, andliteracy rates below 50 percent (at the time the studies were done). All the middle-income its high returns relative to seccountrieshad literacy rates above 50 percent.ondary and higher education,should not start the pendulumswinging too far in the other di-Schooling, screening and productivityrection. High levels of knowledgeare necessary for many people whoThe interpretation of rates of return thus that relative wages are not such serve the poor, both directly asto education-especially secondary and imperfect indicators of productivity, as teachers, health workers and agrihighereducation-is still controversial. It those who have concentrated on their cultural extension workers, andhas often been argued that educational institutional characteristics and determiqualif.cationsare simply a "screening" nants have supposed. In developed indirectly as researchers, technidevice,signaling an individual's produc- countries the relative wages of different cians, managers and administrators.tive qualities to an employer without occupations have gradually but steadily While their skills must be developedactually enhancing them. In some changed in response to increases in the to a considerable extent throughdeveloping countries, moreover, the supply of educated labor. That the samepublic sector-and some heavily protected process operates even in the public sector practhcal experience and i otherparts of the private sector-are the main in developing countries is suggested, for ways, there is for some purposesemployers of university and even second- example, by the fact that the relative no better or cheaper substitute forary-school graduates: it has been sug- salaries of teachers and civil servants the formal disciplines of convengestedthat the salaries they pay are often are much higher in Africa, where edu- tional schooling. Even allowing forartificially inflated and bear little relation cated manpower is much scarcer, thanto relative productivity; and that educa- in Asia, where it is more abundant. doubts about the estimated ratestional requirements serve merely to ration The conventional economic interpre- of return to secondary and higheraccess to these inflated salaries. In both tation of the association between school- education, and for the existencecases, earnings differences associated ing and wages is further strengthened by of some educated unemploymentwith different levels of education would a few studies showing that more educated (see box on next page), there areoverstate the effect of education on workers have increased output in spedficproductivity. manufacturing industries, by evidence unquestonably severe shortagesOn the other side, it is argued that of substantial returns to education even of skilled people in many developingschool "screening" is by no means all in agriculture and other traditional small- countries.wasteful and is preferable to such other scale activities, where one would expect More economical ways of proscreeningmethods as caste or family educational credentials to be much less ducing skilled people need to beconnections. -It is also argued that labor important, and by the macroeconomic found. First, greater use of in-careermarkets are not so monopolistic, and evidence discussed in the box on page 38. and on-th trater shof beon-the-job training should be9and49