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DFID New Economists’ Guide DFID NEW ECONOMISTS’ GUIDE Chapter on Education Economics This report has been prepared by Dr Geeta Kingdon, Consultant, through the DFID Economist Resource Centre Framework in collaboration with Enterplan Ltd. Contents Page 1. Introduction The value of education 1 Current directions in economics of education 1 Focus and plan of the chapter 2 2. Rationale for public sector action in education markets Market failures in education 3 Education and economic growth 4 Education and inequality 5 Rights based rationale for public action 6 3. External efficiency of education Measurement of returns to education 8 Evidence on returns 11 Challenges in estimating returns to education accurately 13 The poverty reduction implications of the pattern of returns to education 15 4. Internal efficiency of the schooling system Measures of the school system’s performance 17 Efficiency of inputs in the production of educational achievement 22 Access-quality trade off in education 28 5. The private sector in education 5.1 Types of schools 31 5.2 Is state-run education truly free? 31 5.3 Relative efficiency of private and public schools 32 5.4 Private-public partnerships in education 33 6. Funding of the education sector Domestic funding priorities for education 35 Patterns of public allocations to education 36 Distributional implications of public education expenditure 38 Dominance of salary costs in education expenditure 39 Institutional and political economy of the education sector 41 7. What interventions improve access and quality 7.1 Increased resources for education 42 i DFID New Economists’ Guide 7.2 Interventions for improved quality 45 7.3 Interventions for improved access 48 References 51 Appendices 57 ii DFID New Economists’ Guide Abbreviations EFA Education for All FTI Fast Track Initiative IEA International Association for the Evaluation of Educational Achievement LSMS Living Standards Measurement Survey MDG Millennium Development Goals PISA Program for International Student Assessment PPP Purchasing power parity PRSP Poverty Reduction Strategy Paper PTA parent–teacher association TIMSS Third International Mathematics and Science Study UDHR Universal Declaration of Human Rights iii DFID New Economists’ Guide List of Tables Table Title Page number number 3.1 Private and social rates of return to education, 1994 11 3.2 Private and social rates of return to education, 2004 12 3.3 Estimates of Mincerian returns to different levels of education in 15 Africa, using recent data 4.1 Primary school completion rate, 2001-2 21 4.2 Inputs into schooling 24 4.3 Studies finding substantial wage returns to cognitive skills 29 4.4 Estimated returns to a standard deviation increase in cognitive skills 30 5.1 Types of schooling provision and funding 31 5.2 Private enrolment as a percentage of total enrolment, by education level 32 6.1 Expenditure on education as a percentage of GDP and as a percentage 36 of the government budget, 1990 and 2000 6.2 Percentage of public education expenditure to different levels of 38 education, by income level of country, 2000 6.3 Benefit incidence of public spending on education in selected African 38 countries 6.4 Benefit incidence and educational needs 39 6.5 Primary education salary expenditure as a percentage of public primary 40 education recurrent expenditure, by region, 2001 7.1 Public current expenditure on primary education per pupil (unit cost), 44 Selected countries, 2001 List of Figures Figure number 4.1 Adult literacy rate in selected countries 17 4.2 Net enrolment ratio in primary school in selected countries 19 6.1 Share of primary, secondary and tertiary education in total public 37 education expenditure, Selected countries, 2000 6.2 Share of primary teacher salaries in total public primary education 40 expenditure, 2001 7.1 Per pupil expenditure in primary education, 2001: PPP dollars 44 7.2 Student achievement in mathematics and per capita GNP 45 List of boxes Box number 2.1 A definition of the rights-based approach 6 2.2 DFID articulation of the rights-based approach 6 4.1 Summary of findings in Fuller (1986) 26 4.2 Summary of findings in Hanushek (2003) 27 7.1 Education related Millennium Development Goals 42 7.2 World Bank President appeals to rich countries to help educate 100 43 million out-of-school children worldwide 7.3 Major conclusions from more than forty years of international 46 achievement surveys 7.4 Non-formal primary education in Bangladesh 49 iv
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