Education and Economic Development*
SC5211, TR 9:35-10:50
Economics Department
ECON 282
Human and Organizational Development
EDLS 2780 - 02
Spring Semester, 2004
Kathryn Anderson
Associate Professor of Economics
404 Calhoun Hall
Box 351819 , Station B
Vanderbilt University
Nashville, Tennessee, 37235
Tel: 615 322 – 0263
Fax: 615 343-8495
Cell: 615 948-0647
Email: Kathryn.Anderson@vanderbilt.edu
Office hours: TR 2:30-3:30 PM; W 2-3 PM
Stephen P. Heyneman
Professor
International Education Policy
Department of Leadership and Organizations
Box 514 Peabody Campus
Payne 205 B
Nashville, Tennessee 37203
Tel: 615 322 – 1169
Fax: 615 343 – 7094
Cell: 615 406 – 0287
Email: s.Heyneman@vanderbilt.edu
Office hours Tuesday 1:30 - 3PM, Payne Hall 205
Teaching assistants:
Matthew Pepper, Economics: Buttrick 201, F 9-11; Phone: 26243
matthew.pepper@vanderbilt.edu
Natasha Rumyantseva, Education Policy
Nataliya.l.rumyantseva@vanderbilt.edu
Background
For fifty years the predominant language of development has been that of economics and
economic policy. Within that, one important emphasis has been on the degree to which human
capital has been able to contribute to individual productivity and national growth, to occupational
mobility and the equality of income.
However, the theories on which human capital assumptions are based have evolved over time,
and have been the subject of controversy. This course will survey a range of those issues,
keeping in mind the tradeoff in understanding between breadth and depth.
The course will begin by reading some major contributors to human capital theories in the
1950’s both from market and planned economies. It will then move on to cover issues of
educational planning, and the different methods to answer questions of how much a society
should invest in education. It will cover the debates over one versus another method and the
views about whether these methods tended to “distort” investment policies and strategies. The
economics of basic and higher education will be included, as well as costs, finance, and internal
efficiency. Policies and experiments in education reform will be examined throughout the
semester. At the end of the course there will be a discussion of the shift from human capital
models to models of social capital, and what this implies for the future.
Students will be asked to analyze data sets covering issues of education and growth as well as the
rates of return to education.
Designed as a survey of issues, students will become familiar with the different views over
investing in education, the methods to evaluate the effectiveness of those investments, and the
analytic trends within international agencies and national governments when education
investments are rationalized.
Prerequisites: ECON 231 and ECON 150 or consent of instructor.
2
Course Schedule
1.
Introduction
2.
History of Human Capital in Economic Thought
3.
Private and Social Benefits and Costs of Education
4.
Statistics: How to Estimate Rates of Return to Education
5.
National Planning and Techniques of Manpower Forecasting
6.
Debates Over Planning and Market Based Assumptions
7.
Education Finance
8.
Internal Efficiency
9.
Experiments and Policies in Primary and Secondary Education
10.
Economic Issues in Basic and Higher Education
11.
Experiments and Policies in Higher Education
12.
Education, Income, Equity and Gender
13.
Experiments and Policies: Gender Inequality
14.
Education, Health, Fertility
15.
Experiments and Policies: Fertility and Health
16.
The Impact of Education on Social Cohesion
17.
Education and Economic Growth
18.
Summary
3
Course Syllabus
Section 1:
Introduction
Section 2:
History of Human Capital in Economic Thought
Komarov (1968)*
Schultz (1964) *
Vaizey (1968)*
pp. 85-92
pp. 4-6
pp. 50-56
Section 3
Private and Social Benefits and Costs of Education
Psacharopoulos and Woodhall
(1985)*
Solomon (1987)
pp.166-184
Section 4:
Statistics: How to Estimate Rates of Return
Heyneman (1980a)
Heyneman (1980b)
Hotchkiss and Kaufman*
Psacharopoulos (1985)*
pp.145-163
pp.25-34
pp.339-362, 383-392
pp. 583-604
Section 5:
National Planning and the Techniques of Manpower
Forecasting
Hinchliffe (1987)
Psacharopoulos (1987)
Psacharopoulos and Woodhall
(1985)*
pp. 315-323
pp. 331-335
pp. 72- 104
Section 6:
Debates Over Planning and Market -Based Assumptions
Bennell (1996)*
Heyneman (1995)*
pp. 235-248
pp. 560-583
Section 7:
Education Finance
Benson (1978) *
Coombs and Hallak (1987)
pp. 261 – 291; 331 - 373
pp. 55-96
Section 8:
Internal Efficiency
Hanushek (1994)*
Hedges, Laine, & Greenwald
(1994a)*
pp. 45-51
pp. 5-14
pp. 83-93
4
Hedges, Laine, & Greenwald
(1994b)*
Heyneman and Loxley (1983)*
pp. 9-10
Section 9:
Experiments and Policies in Primary and Secondary
Education
Angrist et al. (2002)*
Heyneman (1997)*
Wiseman (1969)*
pp. 1535-1558
pp. 333-339
pp. 360-381
Section 10:
Economic Issues in Basic and Higher Education
Guttmann (1987)*
World Bank (1994)*
pp. 139-148; 222-232
pp. 1-15
Section 11:
Experiments and Policies in Higher Education
World Bank (1999)*
World Bank (1998)*
pp. 1-21
pp. 7-22, 46-50
Section 12:
Education, Income, Equity and Gender
World Bank (2001)*
pp.73-107; 147-180
Section 13:
Experiments and Policies: Gender
Kim, Alderman, and Orazem
(1999)*
Section 14:
pp. 443-465
Becker (1991)*
Grossman and Kaestner (2000)*
pp. 93-112
pp. 69-123
Section 15:
Experiments and Policies: Fertility and Health
pp 1162-1194
Education, Health, Fertility
Eisemon, Patel, and Abagi (1988)* pp. 55-66
Lam and Duryea (1999)*
pp. 160-192
Section 16:
The Influence of Education on Social Cohesion
Coleman (1998)*
Heyneman (2000)
Heyneman (2002-2003)*
OECD (2001)*
pp. S95-S120
pp. 173-191
pp. 73-97
pp. 39 –63
5
Section 17:
World Bank (1993)*
Education and Economic Growth
pp. 43-69
Section 18:
Summary
Heyneman (2003)*
pp. 315-337
*Required reading
Class Methodology
Classes will combine lecture, discussion and small group exercises. Students are expected to
contribute to class discussions by sharing their understanding of the readings, and by responding
to questions set for debate. Students will take the lead in many classes by framing the discussion
of readings or presenting cases for discussion. Students will learn how to use household survey
data to economic estimate models that can be used for policy evaluation.
Materials
Materials for the course will be divided into four categories: required, recommended, case study,
and others as relevant background.

Required readings are in a classpak that can be purchased at Campus Copy.

Recommended readings will be available either in the library or on Prometheus.

Case study materials will be on library reserve.

Background materials will be available in the library, but not on reserve.
6
Requirements
Student Assessment
% of Final Grade
Midterm examination
Final examination
One group statistical assignment
Group paper/presentation
30
30
20
20
The midterm will be due on March 4th and will cover the first half of the course.
The final exam will be due on April 23rd and will cover the second half of the course. There will
be no alternative dates considered for either exam.
Additional recognition will be give for those whose class participation is excellent.
Graduates students will be expected to design their own research paper.
Paper
Option #1: Economic issues within an assigned case (written assignment of no more
than 15 pages). Students may choose from one of the case studies listed at the end of the
bibliography. The paper should identify and discuss economic issues and highlight how they
coalesce or are in conflict. Materials on reserve can be used, or case can be obtained from the
World Bank or other websites. All cases must derive from the economics of an investment from
the World Bank or from one of the regional development banks.
Final draft due no later than April 23.
Option #2 : Research Paper or Oral Presentation
The research paper analyzes a human capital policy issue of the student’s choosing but
approved by the instructors. The research paper should proceed in two stages:
First draft a proposal: one page submission plus an initial list of references by which should
contain the following elements:




A clear statement of the organizational unit (country, NGO, etc.) and the policy issues
being researched
A proposed line of exploration
A draft chronology of events or the socio-political setting related to the issue being
researched
An initial list of references
Final draft must be no longer than 15 pages due by 5:00 on April 23rd.
7
An alternative is to research an education policy issue that has not been addressed in class,
prepare a 5 page, detailed outline summary of the research, and make a presentation to the class
of your research. The presentation should be summarized on no more than 10 Power Point or
overhead slides and should be no longer than 20 minutes.
Statistical exercise
Using data from a Living Standards Measurement Survey, estimate an earnings function and
compute the rate of return to education. Write an interpretation and evaluation of the regression
results. Explain how these results could be used in a policymaking.
We will have a session in the Garland microcomputer laboratory to teach you how to input data
and estimate descriptive statistics and regression with STATA. Files containing macroeconomic,
cross-country data on growth and inputs and household data on earnings and household
characteristics from the LSMS for several different countries will be developed for your use.
Your job will be to use these data to estimate and interpret models. These statistical projects will
be performed within small groups (2-3 persons per group). The final report should contain a
five-page discussion and interpretation of results, tables of results, and computer output. Each
project is worth 10 percent of the final grade. Each team member will evaluate the contributions
of other members to the assignments. If you do not do your part on an assignment, you will not
receive any credit for the assignment.
Honor Code
We support the Undergraduate and the Graduate Honor Codes. Students are expected to do their
own work on all assignments. Any evidence of cheating on exams, the paper, or the statistical
assignments will be reported to the Honor Council. Cheating includes but is not limited to
copying the exams of other students, plagiarism, and having others estimate and/or interpret your
statistical models on the statistical assignments.
8
Bibliography
Angrist, Joshua et. al. 2002. Vouchers for Private Schooling in Colombia: Evidence from a
Randomized Natural Experiment. The American Economic Review, 92 (5): 1535-1558.
Becker, Gary S. 1991. A Treatise on the Family. Cambridge, MA: Harvard University Press,
pp.93-112.
Bennell, Paul. 1996. Using and abusing the rates of return: a critique of the World Bank.
International Journal of Education Development, 16(3): 235 – 248.
Benson, Charles S. 1978. The Economics of Education. Boston: Houghton Mifflin Company,
pp.261-291 and 331-373.
Coleman, James S. 1998. Social capital in the creation of human capital. American Journal of
Sociology, v.94 (Supplement): S95 – S120.
Coombs, Philip H. and Hallak, Jacques. 1987. Cost Analysis in Education: A Tool for Policy and
Planning. Baltimore: Johns Hopkins University Press, pp.55-96.
Eisemon, Thomas, Patel, Vimla L., Abagi, J. 1988. Read these instructions carefully:
Examination Reform and Improving Health Education in Kenya. International Journal of
Educational Development, Vol. 8, No. 1, pp. 55-66
Grossman, Michael and Robert Kaestner. 2000. Effects of education on health. In, J.R. Behrman
and N. Stacey (eds.), The Social Benefits of Education. Ann Arbor, MI: University of Michigan
Press, pages 69-123.
Guttmann, A.1987. Democratic Education. Princeton: Princeton University Press, pp. 139-148
and 222-232.
Hanushek, E.A. 1994. The impact of differential expenditures on performance. Educational
Researcher, v.18(4): 45 – 51
Hedges, L. V. Laine, R.D. and Greenwald, R. 1994a. Does money matter? A meta-analysis of
studies of the effects of differential school inputs on student outcomes. Educational Researcher,
v.23(3): 5 – 14.
Hedges, L. V., Laine, R.D. and Greenwald, R. 1994b. Money does matter somewhere? A reply
to Hanuskek. Educational Researcher, v.23 (4): 9 – 10.
Heyneman, S.P. 1980a. Investment in Indian education: uneconomic? World Development 8(4):
145 – 163.
Heyneman, S.P. 1980b. The evaluation of human capital in Malawi. Washington D.C.: The
World Bank, Staff Working Paper 420 (October), pp.25-34.
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Heyneman, S.P. 1995. Economics of education: disappointments and potential. Prospects,
XXV(4): 559-583.
Heyneman, S.P. 1997. Economic growth and the international trade in education reform.
Prospects, XXVII(4): 501 – 30.
Heyneman, S.P. 2000. From the party/state to multi-ethnic democracy: education and social
cohesion in the Europe and Central Asia region. Educational Evaluation and Policy Analysis,
22(2): 173 – 191.
Heyneman, S. P. 2002-03. Defining the Influence of Education on Social Cohesion.
International Journal of Educational Policy, Research and Practice, 3 (4): 73-97.
Heyneman, S.P. 2003. The history and problems in the making of education policy at the World
Bank: 1963 - 2000. In Baker, David P. and Gustafson, Darcy (editors), International
Perspectives on Education and Society. Oxford: Elsevier Science, pp.315-337.
Heyneman, S.P. and Loxley, W. 1983. The effect of primary-school quality on academic
achievement across twenty-nine high and low- income countries. The American Journal of
Sociology, 88(6): 1162 – 94.
Hinchliffe, K. 1987. Forecasting manpower requirements. In, G. Psacharoupoulos (ed.),
Economics of Education: Research and Studies. London: Pergamon Press, pp.315-323.
Kaufman, Bruce and Julie Hotchkiss. 2000. The Economics of Labor Markets, Fifth Edition. Fort
Worth, TX: The Dryden Press, pp.339-362, 383-392.
Kim, J., H. Alderman, and P.F. Orazem. 1999. Can private school subsidies increase schooling
for the poor? The Quetta urban fellowship program. World Bank Economic Review, 13(3):443466.
Komarov, V.E. 1968. The relationship between economic development and the development of
education. In, UNESCO, Readings in the Economics of Education. Paris: UNESCO, pp.85-92.
Lam, D. and S. Duryea. 1999. Effects of schooling on fertility, labor supply, and investments in
children. Journal of Human Resources, 34(1): 160-192.
OECD. 2001. The Well Being of Nations: The Role of Human and Social Capital. Paris: OECD,
pp.39-65.
Psacharopoulos, George. 1987. The manpower requirements approach. In G. Psacharopoulos
(ed.), Economics of Education: Research and Studies. London: Pergamon Press, pp. 331-335.
Psacharopoulos, George. 1985. Returns to education: a further international update and
implications. Journal of Human Resources, 20 (4), pp. 583 – 604.
Psacharopoulos, George and Woodhall, Maureen.1985. Education for Development: An Analysis
of Investment Choices. New York: Oxford University Press, pp.72-104.
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Schultz, Theodore W. 1964. Education and values conducive to economic growth. Agricultural
Policy Review, v.2: 4 – 6.
Solomon, L.C. 1987. The range of educational benefits. In, G. Psacharopoulos (ed.), Economics
of Education Research and Studies. London: Pergamon Press, pp.83-93.
Vaizey, John. 1968. What some economists said about education. In, UNESCO, Readings in the
Economics of Education. Paris: UNESCO, pp.50-567.
Wiseman, J. 1969. Vouchers for education. In, M. Blaug (ed.) Economics of Education, Vol. 2.
London: Penguin Modern Economics, pp.360-381.
World Bank. 1993. The East Asian Miracle. Washington, DC: The World Bank, pp.43-69.
World Bank. 1994. Higher Education: Lessons of Experience. Washington D.C. The World
Bank, pp.1-15.
World Bank. 1998. Staff Appraisal Report Republic of Hungary Higher Education Reform
Project. Report No. 16536-HU. Washington, DC: The World Bank, pp. 7-22, 46-50.
World Bank. 1999. Project Appraisal Document on a Proposed Loan of US$20.0 Million and a
Higher Education Reform Project. Report No. 19146-CHA. Washington, DC: The World Bank,
pp.1-21.
World Bank. 2001. Engendering Development. A World Bank Policy Research Report.
Washington, D.C.: World Bank ; New York, N.Y. : Oxford University Press, pp.73-107 and 147180.
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Case Study Materials
World Bank: Staff Appraisal Reports
Higher Education Reform Project, Republic of Hungary, January 30, 1998
Higher Education Reform Project, People’s Republic of China, April 14, 1999
Higher Education Support Project: Development of Undergraduate Education, Indonesia, May
22, 1996.
Higher Education Management Support Project, Republic of Guinea, November 6, 1995
Higher Education Project, Republic of Senegal, May 7, 1996
Reform of Higher Education and Research Project, Romania, August 26, 1996
World Bank: Economic, Sector and Research Reports
China: Management And Finance of Higher Education, 1986
China: Higher Education Reform, June 27, 1996
Simon Schwartzman, Higher Education in Brazil: the Stakeholders, October, 1998
Michael Crawford and Lauritz Holm-Nielsen, Brazilian Higher Education: Characteristics and
Challenges, October, 1998
Thomas Owen Eisemon, Private Initiatives and Traditions of State Control in Higher Education
in Sub-Saharan Africa, January, 1992.
Thomas Owen Eisemon and Lauritz Holm-Nielsen, Reforming Higher Education Systems: Some
Lessons to Guide Policy Implementation, April, 1995
Keith Hinchliffe, Higher Education in Sub-Saharan Africa, August, 1985
Peter T. Knight and Sulaiman S. Wasty, Comparative Resource Allocations to Human Resource
Development in Asia, Europe, and Latin America, 1991.
Donald R. Winkler, Higher Education in Latin America: Issues of Efficiency and Equity, 1990.
Mary Jean Bowman, Benoit Millot, Ernesto Schiefelbein, The Political Economy of Public
Support of Higher Education: Studies of Chile, France, and Malaysia. June, 1986
Rosemary Bellew and Jseph DeStefano, Costs and Finance of Higher Education in Pakistan,
1991.
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Windham, D.M. and Chapman, D.W. Advances in Educational Productivity and Evaluation of
Educational Efficiency. London: JAI Press, 1990.
Other Case Materials
Benin:
in David R. Evans, et. al. (1996) Formulating Education Policy: Lessons and
Experience from sub-Saharan Africa. Paris: Association for the
Development of African Education. (On Reserve)
Uganda:
in David R. Evans, et. al. (1996) Formulating Education Policy: Lessons and
Experience from sub-Saharan Africa. Paris: Association for the
Development of African Education. (On Reserve)
Columbia:
Hanson, Mark (1995). Democratization and Decentralization in
Colombian Education. Comparative Education Review, 39 (1), 101-119. (in
packet)
Peru:
Haddad, Wadi (1994). “Policymaking in Peru: Synoptic with
Revolutionary Ideology” in The Dynamics of Education Policymaking.
Washington, DC: World Bank EDI Development Policy Case Series: 33-71. (On
Reserve)
Jordan:
Haddad, Wadi (1994). “Policymaking in Jordan: From Incremental to Synoptic”
in The Dynamics of Education Policymaking. Washington, DC: World Bank EDI
Development Policy Case Series: 72-119. (On Reserve)
Thailand:
Haddad, Wadi (1994). “Policymaking in Thailand: From Issue Specific to
Strategic” in The Dynamics of Education Policymaking. Washington, DC: World
Bank EDI Development Policy Case Series: 120-177. (On Reserve)
India:
Naik, Chitra (1994) "Promoting primary and elementary education in
India" in Collaborating for educational change: the role of teachers,
parents and the community in school improvement edited by Sheldon
Shaeffer. Paris: IIEP. Pp. 121-160. (On Reserve)
Costa Rica:
Carnoy, Martin and Carlos A. Torres (1994) “Educational Change and
Structural Adjustment: A Case Study of Costa Rica” in Coping with
Crisis. Austerity, Adjustment and Human Resources edited by Joel
Samoff. New York: Cassell: 64-99. (in packet)
Tanzania:
Samoff, Joel with Suleman Sumra (1994) “From Planning to Marketing:
Making Education and Training Policy in Tanzania” in Coping with
Crisis. Austerity, Adjustment and Human Resources edited by Joel
Samoff. New York: Cassell: 134-172. (On Reserve)
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