Investments in Education
and Socioeconomic
Development
José Pablo Arellano
Mexico City, August 2003
Contribution of education to
development
Return on investment in education
In Latin America, rates of return are
among the highest
Return on early investment in education
is greater
Primary education has greatest return
Return on investment in
education
(Source: Psacharopoulos and Patrinos, 2002)
Return on an additional year of
schooling
(Source: Psacharopoulos and Patrinos, 2002)
Contribution of education to
growth
Review of growth theories, more emphasis on
human capital (worker productivity and
innovation)
Between one tenth and one third of growth
due to human capital
One additional year of schooling among the
work force increases per capita GDP by 6%
over the long term
Contribution has been greater for developing
countries in past few decades
Competitiveness and education
Surveys on international competitiveness
In 19 Latin American countries, math and
science achievement averaged 3.6 vs.5.6 in
Eastern Europe and 4.9 in East Asia. Public
school quality averaged 2.7, 4.9, and 4.2,
respectively.
Education level of work force growing slower
than in other regions
Availability and Retention of
Engineers
High-income OECD
East Asia and Pacific
Eastern Europe
Latin America
Secondary Completion
Percentage of population having completed lower secondary education
(by age bracket or year of birth, 2000 in %)
100
95
92
90
80
94
88
83
76
M exico
63
58
56
52
60
50
P araguay
P eru
Uruguay
40
38
30
28
26
30
10
B razil
Chile
70
20
A rgentina
30
27
25
21
Japan
Ko rea
13
11
9
USA
0
(1936-45) 55-64
Czech Rep.
(1946-55) 45-54
(1956-65) 35-44
(1966-75) 25-34
Equity
Growing role of education due to
increased demand for qualifications
Questioning of other instruments for
redistribution of income and wealth
Distribution of Public Spending on Education by Quintile
of Household Income a/
Country
I
(Poorest)
II
QUINTILES
III
IV
V
(Richest)
ARGENTINA 1991 d/
Primary
Secondary
Higher
32.5
42.7
28.7
8.3
18.7
21.0
19.0
11.1
21.1
19.9
26.0
16.0
15.4
11.9
15.6
25.8
12.4
4.5
10.7
38.8
BOLIVIA 1990
Primary and secondary
Higher
32.0
36.6
12.4
24.3
26.3
15.5
20.0
19.3
22.9
14.8
12.3
25.8
8.9
5.5
23.4
BRAZIL 1994 e/
30.1
27.3
21.6
14.3
6.8
CHILE 1996
Primary
Secondary
Higher
34.0
38.2
26.5
6.3
26.1
26.3
24.7
16.3
19.4
17.6
22.2
37.9
14.0
12.5
17.6
20.5
6.5
5.3
9.1
19.0
COLOMBIA 1997
Primary
Secondary
Higher
21.4
35.9
24.9
3.4
21.2
28.7
26.8
8.0
21.5
21.2
24.4
19.1
18.1
10.2
16.6
27.6
17.6
4.1
7.3
41.6
COSTA RICA 1986
Primary
Secondary
Higher
15.7
30.0
17.8
1.7
18.4
27.0
21.4
9.1
19.6
22.0
23.1
15.5
23.8
13.0
21.2
35.0
22.5
8.0
16.5
38.7
URUGUAY 1993
Primary
Secondary
Higher
33.2
51.6
30.3
5.4
21.3
22.2
28.9
7.2
16.5
12.7
17.6
21.4
14.7
9.9
14.2
24.3
14.3
3.7
9.0
41.7
Financing: amount of resources
In 1990s, public investment in education
showed highest growth in LAC, jumping from
2.9% of GDP to 3.9%.
Future resources will depend on: economic
growth (salaries), lower demographic
pressure, greater demand for coverage at
costlier levels, family contribution (economic
growth and policies)
Expanding coverage
Universal coverage of primary education
increases demand for secondary and
tertiary. Higher costs per student.
Achieving full secondary education
coverage. Types of problems: children
never enrolled, late enrolment, poor
performance (low achievement,
repeaters), dropouts.
Spending per student as a percentage of per capita GDP
Preschool
Primary
Secondary
Higher
(1)
(2)
(3)
(4)
Argentina
Brazil 1, 2
Chile
Jamaica 1
Mexico
Paraguay
Peru
Uruguay 1
11
18
17
11
14
x(2)
10
13
13
14
20
21
13
20
10
11
19
16
22
30
18
35
13
14
46
195
80
182
57
125
31
25
Czech Republic
Finland
Korea
OECD average
18
16
13
18
13
18
21
19
25
25
25
25
42
35
39
44
Poor attending school by age
Percentage
100%
90%
80%
70%
60%
6 to 14 years old
50%
40%
30%
6Colombia, 2000 7
Bolivia, 19978
9
Brazil, 1996
10
11 Guatemala, 1999
12
Dominican
Edad Rep., 1996
13 1998
Nicaragua,
14 2000
Peru,
Population attending school, by
age and income
100%
95%
90%
85%
6 to 14 years old
80%
75%
70%
6
7
8
9
10
11
12
Age
Colombia, poor
Colombia, rich
Peru, poor
Peru, rich
13
14
Percentage of children in poorest two quintiles attending school at
6 and 8-9 years of age
100%
95%
95%
90%
94%
97%
95%
83%
82%
80%
74%
76%
70%
82%
73%
73%
70%
60%
50%
50%
40%
35%
30%
34%
20%
10%
0%
Colombia 2000
Bolivia 1997
Brasil 1996
Rep Dominicana
1996
Guatemala 1999
Maximum attendance
Haití 1994-95
Nicaragua 1998
Minimum attendance
Perú 2000
Education status of population between 15 and 19
years old (LAC, by area, 1999)
100%
90%
17
6.6
11.4
13.6
3.6
13.6
80%
70%
60%
14.2
31.6
35.2
42.4
50%
19.3
7.2
40%
30%
20%
14.1
19.5
9.9
7.8
49.2
33.2
25.3
10%
10.7
0%
URB Arg, Chi, Pan.
Never attended
Dropped out in primary
4.5
4.2
5.8
URB Sal, Gua, Nic.
RUR Bra, Col, Peru.
RUR Bol, Hon, Mex.
Dropped out in secondary
Repeated
In proper age group
Graduated from secondary
Latin America (18 countries): Dropout rates for adolescents
aged 15-19, by area
Overall dropout rate
Urban areas
Simple average
Rural areas
Simple average
Clear progress in reducing dropout rates in the 1990s. For 18
countries in LAC, rate dropped from 45% to 37% (from 32%
to 27% in urban areas, and from 64% to 51% in rural areas)
More emphasis needed on starting school on
time
Policies on incentives and benefits according to
age of children
Reducing age children enter school vs. increasing
coverage at an older age
Dropout rates associated with teenage
pregnancy: very high and have increased in most
of the countries in past 15 years
Policies to finance expansion of higher education
Breakdown of spending (S)
S = HS x H x T
S/GDP = (HSxH/pcGDP)x(T/ST)x(ST/N)x(N/P)
HS: Hourly teacher salary
H: Hours of teaching per teacher contract
T: Teachers
ST: Students
N: School-age population
P: Total population
GS: Grade-age students
RS: Late-starter and/or repeater students
Student/teacher ratios vs. teacher salaries
(Primary education)
40
Student/teacher ratio
35
Chi
30
Per
25
20
15
Bra
Arg
Czech Uru
Fin
Rep.
Korea
Jam
Mex
Par
10
5
0
0%
50%
100%
150%
200%
Teacher salaries (as % of per capita GDP)
250%
300%
Quality: student achievement
International test results
Is it a resource problem?
How to improve the use of resources?
PISA 2000 performance by 15-year-old students
(reading comprehension test)
3
100%
5
90%
19
80%
70%
5.7
6
9
18.5
9.5
18.7
22
31
41
47
49
46
26
26
32
60%
50%
30%
50
33
40%
28
21
28
54
57
42
5
5
9
5
Finland
Korea
43
20%
10%
23
23
20
16
0%
Argentina
Brazil
Below Level 1
Chile
Mexico
Level 1
Peru
Levels 2 & 3
Level 4
12
6
New
Zealand
OECD
average
Level 5
PISA 2000 performance by 15-year-old population
(reading comprehension test)
100%
6.5
2.1
3.5
3.4
90%
27.6
80%
33.6
34.8
28.0
11.8
20.4
16.2
19.8
44.9
54.0
14.3
17.2
40.9
43
24
33.0
9.2
15.8
20%
10%
16.0
22.1
40%
30%
29.2
30.0
60%
50%
8.5
17.6
15.6
70%
5.4
32
28
0%
Argentina
Not in System
10.6
39
Brazil
Chile
Below Level 1
Mexico
Level 1
Peru
4.9
5
4.5
6
Finland
Korea
Levels 2 & 3
Level 4
5.3
11
OECD
average
Level 5
Differences in math test performance
(OECD vs. LAC 90th percentile)
700
655
650
600
550
536
500
502
496
464
450
431
400
350
326
300
5
10
25
OECD
50
Argentina
Brazil
Percentile
Chile
75
Mexico
90
Peru
95
Differences in math test performance
(Korea vs. LAC 90th percentile)
700
676
650
600
550
536
502
500
496
464
450
431
400
350
5
10
25
50
75
90
Percentile
Korea
Argentina
Brazil
Chile
Mexico
Perú
95
Spending per student (primary) vs. reading test performance
(PISA 2000)
600
Fin
550
Aus
U.K.
Performance
Jap
Fra
Czech Rep.
500
Ger.
Gre
Kor
Nor
U.S.A.
Spa.
Hun
Por
Pol
Ita
Swe.
Austria
Swi. Den.
450
Mex
Chi
Arg
400
Bra
350
Peru
300
5%
10%
15%
20%
Spending per student / per capita GDP
25%
30%
System governance
Decision-making and decision-makers: Who is
responsible and what are the consequences?
Examples of problems: teacher absenteeism, lack of
evaluation; politization and/or strong influence of
teacher unions on appointments and promotions
Overregulated system that maintains decision-making
and administration system designed prior to mass
education
High turnover among senior education ministry
officials and discontinuity of policies
Parents and other stakeholders have little say