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 highestReturn on early investment in education is greaterPrimary 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 capitalOne additional year of schooling among the work force increases per capita GDP by 6% over the long termContribution has been greater for developing countries in past few decades

Competitiveness and education

Surveys on international competitivenessIn 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

High-income OECD

East Asia and Pacific

Eastern Europe

Latin America

Availability and Retention of Engineers

Percentage of population having completed lower secondary education (by age bracket or year of birth, 2000 in %)

5256

38

28

13

30

11

25

9

2726

58

21

76

92

63

94

30

95

83 88

0

10

20

30

40

50

60

70

80

90

100

(1936-45) 55-64 (1946-55) 45-54 (1956-65) 35-44 (1966-75) 25-34

Argentina

Brazil

Chile

Mexico

P araguay

P eru

Uruguay

Czech Rep.

J apan

Korea

USA

Secondary Completion

Equity

Growing role of education due to increased demand for qualificationsQuestioning of other instruments for redistribution of income and wealth

Distribution of Public Spending on Education by Quintile of Household Income a/

I II III IV VCountry (Poorest) (Richest)

ARGENTINA 1991 d/ 32.5 18.7 21.1 15.4 12.4Primary 42.7 21.0 19.9 11.9 4.5Secondary 28.7 19.0 26.0 15.6 10.7Higher 8.3 11.1 16.0 25.8 38.8

BOLIVIA 1990 32.0 24.3 20.0 14.8 8.9Primary and secondary 36.6 26.3 19.3 12.3 5.5Higher 12.4 15.5 22.9 25.8 23.4

BRAZIL 1994 e/ 30.1 27.3 21.6 14.3 6.8

CHILE 1996 34.0 26.1 19.4 14.0 6.5Primary 38.2 26.3 17.6 12.5 5.3Secondary 26.5 24.7 22.2 17.6 9.1Higher 6.3 16.3 37.9 20.5 19.0

COLOMBIA 1997 21.4 21.2 21.5 18.1 17.6Primary 35.9 28.7 21.2 10.2 4.1Secondary 24.9 26.8 24.4 16.6 7.3Higher 3.4 8.0 19.1 27.6 41.6

COSTA RICA 1986 15.7 18.4 19.6 23.8 22.5Primary 30.0 27.0 22.0 13.0 8.0Secondary 17.8 21.4 23.1 21.2 16.5Higher 1.7 9.1 15.5 35.0 38.7

URUGUAY 1993 33.2 21.3 16.5 14.7 14.3Primary 51.6 22.2 12.7 9.9 3.7Secondary 30.3 28.9 17.6 14.2 9.0Higher 5.4 7.2 21.4 24.3 41.7

QUINTILES

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.

Preschool Primary Secondary Higher

(1) (2) (3) (4)

Argentina 11 13 19 46 Brazil 1, 2 18 14 16 195 Chile 17 20 22 80 Jamaica 1 11 21 30 182 Mexico 14 13 18 57 Paraguay x(2) 20 35 125 Peru 10 10 13 31 Uruguay 1 13 11 14 25

Czech Republic 18 13 25 42 Finland 16 18 25 35 Korea 13 21 25 39 OECD average 18 19 25 44

Spending per student as a percentage of per capita GDP

30%

40%

50%

60%

70%

80%

90%

100%

6 7 8 9 10 11 12 13 14Edad

Percentage

Colombia, 2000 Bolivia, 1997 Brazil, 1996 Dominican Rep., 1996 Guatemala, 1999 Nicaragua, 1998 Peru, 2000

Poor attending school by age

6 to 14 years old

70%

75%

80%

85%

90%

95%

100%

6 7 8 9 10 11 12 13 14

Age

Colombia, poor Colombia, rich Peru, poor Peru, rich

Population attending school, by age and income

6 to 14 years old

Percentage of children in poorest two quintiles attending school at

6 and 8-9 years of age

95% 95% 94% 95%

83%

70%73%

97%

34%35%

82%

73%76%74%

50%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Colombia 2000 Bolivia 1997 Brasil 1996 Rep Dominicana1996

Guatemala 1999 Haití 1994-95Nicaragua 1998 Perú 2000

Maximum attendance

Minimum attendance

Education status of population between 15 and 19 years old (LAC, by area, 1999)

4.5 4.2 5.810.7

25.333.2

49.2

9.9

7.8

7.2

14.1

19.5

19.3

35.2

14.2

42.4

31.6

13.613.617

11.4 6.6 3.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

URB Arg, Chi, Pan. URB Sal, Gua, Nic. RUR Bra, Col, Peru. RUR Bol, Hon, Mex.

Never attended Dropped out in primary 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 Rural areas

Simple average

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 timePolicies on incentives and benefits according to age of childrenReducing age children enter school vs. increasing coverage at an older ageDropout rates associated with teenage pregnancy: very high and have increased in most of the countries in past 15 yearsPolicies to finance expansion of higher education

Breakdown of spending (S)

S = HS x H x TS/GDP = (HSxH/pcGDP)x(T/ST)x(ST/N)x(N/P)HS: Hourly teacher salaryH: Hours of teaching per teacher contractT: Teachers ST: StudentsN: School-age populationP: Total populationGS: Grade-age studentsRS: Late-starter and/or repeater students

Student/teacher ratios vs. teacher salaries(Primary education)

CzechRep.

Uru Fin

Arg

Per Bra Jam Korea

Par

Mex

Chi

0

5

10

15

20

25

30

35

40

0% 50% 100% 150% 200% 250% 300%

Teacher salaries (as % of per capita GDP)

Stud

ent/t

each

er ra

tio

Quality: student achievement

International test resultsIs it a resource problem?How to improve the use of resources?

PISA 2000 performance by 15-year-old students(reading comprehension test)

23 23 20 165 6

2133

2828

26

5 59

12

46

4147

49

19

4357 42

50

9

3 56

32

31

26

22

18.55.7

18.79.5

54

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Argentina Brazil Chile Mexico Peru Finland Korea New Zealand

OECD average

Below Level 1 Level 1 Levels 2 & 3 Level 4 Level 5

PISA 2000 performance by 15-year-old population (reading comprehension test)

Not in System Below Level 1 Level 1 Levels 2 & 3 Level 4 Level 5

2432 28

43 39

5 6 11

17.2

15.814.3

9.2

33.0

5.3

16.2

22.120.4

16.0

15.6

4.9 4.5

10.6

34.8

27.633.6 28.0

11.8

40.954.0

44.9

6.52.1 3.5 3.4

30.0

29.2 19.8

17.65.4 8.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Argentina Brazil Chile Mexico Peru Finland Korea O E C D average

Differences in math test performance

(OECD vs. LAC 90th percentile)

326

502

655

536

464496

431

300

350

400

450

500

550

600

650

700

5 10 25 50 75 90 95Percentile

OECD Argentina Brazil Chile Mexico Peru

Differences in math test performance

(Korea vs. LAC 90th percentile)

431

676

536

464

502

496

350

400

450

500

550

600

650

700

5 10 25 50 75 90 95

Percentile

Korea Argentina Brazil Chile Mexico Perú

Spending per student (primary) vs. reading test performance(PISA 2000)

Arg

Mex

Czech Rep.

Gre

Ger.

U.K.

Fin

Aus

FraSpa.

HunPor

PolIta

Swi. Den.

Swe.

Austria

Kor

U.S.A.Nor

Jap

ChiBra

Peru

300

350

400

450

500

550

600

5% 10% 15% 20% 25% 30%

Spending per student / per capita GDP

Per

form

ance

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 promotionsOverregulated system that maintains decision-making and administration system designed prior to mass educationHigh turnover among senior education ministry officials and discontinuity of policiesParents and other stakeholders have little say