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 
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                                                                                              DFID New Economists’ Guide 
                    7.2  Interventions for improved quality                                          45 
                    7.3  Interventions for improved access                                           48 
               
                    References         51 
                    Appendices         57
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                                                                                                   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 
                                                                       
                                                                       
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               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 
                
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