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Discussion Paper

EDUCATION AND TRAINING SERIES

Report No. EDT96

Critical Issues in EducationA World Agenda

George Psacharopoulos

June 1987

Education and Training Department Operations Policy Staff

The views presented here are those of the author(s), and they shou'd not be interpreted as reflecting those of the World Bank.

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Discussion Paper

Education and Training Series

Report No. EDT96

CRITICAL ISSUES IN EDUCATION:

A WORLD AGEN[DA

by

George Psacharopoulos

Research DivisionEducation and Training Department

June 1987

The World Bank does not accept responsibility for the views expressedherein, which are those of the author(s) and should not be attributed tothe World Bank or its affiliated organizations. The findings,interpretations, and conclusions are the results of research or analysissupported by the Bank; they do not necessarily represent official policy ofthe Bank.

Copyright © 1987 The International Bank for Reconstruction and Development/The World Bank

I I

Abstract

The paper gives a summary of what is known on the contribution ofeducation in the development process and discusses what could be done to addressa number of critical issues in this area. These are: how to increase primaryschool coverage, how to enhance school quality, how to finance educationalexpansion and how to improve equality of access. The paper also discusses whatinternational agencies could do to assist a country's educational developmenteffort, like the monitoring of student performance, the develpment of localanalytical capacity and the sharing of cross-country experiences.

CRITICAL ISSUES IN EDUCATION: A WORLD AGENDA

by

George Psacharopoulos

The role of human resources in the development process has long been

recognized. Yet the field of "human resources" is so vast and

interdisciplinary, that unless it is broken dlown into a set of specific and

hence manageable components, one may simply :)ay lip service to it.

This note focuses on the formal education component of human resource

development. The first section gives the background of what is known on the

contribution of education to the development process. The second section

presents a list of critical issues and open questions relating to the subject.

The final section discusses what international agencies and technical

cooperation could do to address such critical issues.

I. The Contribution of Education to the Development Process

Scholars from a variety of disciplines have in the second half of this

century extensively documented the positive role of formal education on many

facets of "development". For example, economists have established the link

between increases in the educational level cf the labor force and economic

growth. Similarly, they have documented a direct link between increases in the

level of schooling in the population and distributional equity. Sociologists

have established the relationship between education and upward social

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mobility. Historians have documented the link between early rises in literacy

and the economic take-off of nations. And a variety of other disciplines have

established the relationship between education and further developmental

outcomes like health, sanitation and fertility.

One of the most important empirical highlights of the link between

education and economic growth stems from the work of Schultz (1961), Denison

(1967) and others. Evidence from 29 countries indicates that a substantial

proportion of the rate of growth of the economy can be attributed to increases

in the educational level of the labor force. As shown in Table 1, the

contribution of education to economic growth is greater, on average, the lower

the country's stage of development. For example, the share of the rate of

economic growth due to education in Africa is two-to-three times that of Europe

and Latin America.

Table 1: The Contribution of Education to Economic Growth

(Percent)

Economic growth rateRegion explained by education

Africa 17Asia 11Latin America 5Advanced 1/ 9

Source: Psacharopoulos (1983). Table 2.

Note: 1/ Refers to Europe and North America.

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In a similar vein, it has been extensively documented that investment

in the lower levels of education within a given country yields the highest

economic payoff. As shown in Table 2, spending on primary education in

developing countries yields a near 30 percent rate of return. Although the

profitability of investment in education diriinishes in post-primary schooling,

investment in secondary and higher education also exhibit acceptable social

rates of return.

Table 2: The Social Returns to Investment in Education(Percent)

Region/Country Type Primary Secondary Higher

Africa 26 17 13Asia 27 15 13Latin America 26 18 16Intermediate 13 10 8Advanced - 11 9

Source: Psacharopoulos (1985), Table 1.

Note: - means not available because of lack of a controlgroup of illiterates.

Obviously, the correlation between education and economic growth could

be interpreted that education is the result: of economic growth rather than the

other way around. However, work by econonmic historians who looked at long

cycles of rises in literary and output has established cause and effect, in the

sense that a rise in literacy has preceded increases in output (Easterlin 1981).

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Such macro estimates have been independently confirmed by several

micro studies linking workers' education with the level of production. For

example it has been found that, other things being equal, four years of farmer

education rather than none results on average in a 9 percent increment in

agricultural productivity (Jamison and Lau, 1982).

Several studies have shown that education has a beneficial effect on

the income level of otherwise low paid workers, especially women, and that it

raises their propensity to participate formally in the labor force. Table 3

shows the typical pattern of how the female labor force participation rate

increases for women with higher levels of education.

Table 3: Female Labor Force Participation by Levelof Education, Puerto Rico (Percent)

ParticipationEducation level rate

Elementary 1-4 16Elementary 5-6 22Elementary 7-8 24High school 1-3 32High school 4 39College 1+ 54

Source: Psacharopoulos (1984), Table 8-6.

In fact, the above estimates are likely to underestimate the true

contribution of education to social development as they are mostly based on

measurable economic outcomes. But a great part of what a household enjoys as

total income" includes items not captured by national accounts statistics like

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the sanitation and health conditions of its members, an important dimension of

which is the number of persons to be fed. Several studies have found that

education has a fertility reduction effect (Cochrane, 1979). Mothers' literacy

also relates significantly to infant and child maortality (Cochrane, Leslie and

O'Hara, 1980).

Accepting an even wider notion of development, which includes not only

the level of income but also its distribution, the provision of education,

especially at the basic level, makes a further contribution to this effect. For

example, it has been found that in Mexico giving primary education to 10 percent

of those without, would reduce a measure of income inequality by 10 percent

(Marin and Psacharopoulos, 1976).

II. An Agenda of Issues

Given the situation described above, there exists a number of critical

issues that must be addressed at world scale for education to make its full

contribution to the development process. These range from increased school

coverage of diverse population groups to the equity effects of educational

provision.

1. How to Increase Primary School Coverage?

Today, over one quarter of the world population aged 15+ is

illiterate, and so are one third of the women. In Africa, more than half of the

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population are illiterate, and in some countries the female illiteracy rate in

rural areas exceeds 98 percent (Table 4).

Table 4: Illiteracy Rates by Region, 1985(Percent)

Region Both sexes Females

World 28 35

Developed countries 2 3Developing countries 38 49

Africa 54 65

Benin

Urban 69 80Rural 93 98

Asia 36 47

Afghanistan

Urban 63 79Rural 85 98

Latin America 17 19

Source: Based on UNESCO (1985).

Access to primary education, which is the key to future literacy, is

far from univeral. Table 5 shows that the primary enrollment ratio in West

Africa is only 63 percent. Given the trends of population growth of the 6-11

years old, (Table 6) the challenge to human resource development planners is how

co provide primary schooling to the ever growing cohorts of youth.

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Table 5: Enrollment Ratios, Major World Regionscirca 1980

(Percent)

Region Primary Secondary Higher

East Africa 77 10 1West Africa 63 14 2

East Asia & Pacific 100 45 8South Asia 69 26 5

Latin America 100 43 13

Europe, Middle East& North Africa 93 44 8

Developing countries 86 32 7

Developed countries 100 87 29

Source: Based on World Bank and UNESCO data.

Note: Excludes countries with 1982 population less than one million.

Table 6: Trend in the Number of Children 6-11 years old, by region, 1970-2015(in mill:Lons)

Region 1970 1985 2000 2015

World 522 645 735 798Developed countries 110 97 100 99Developing countries 412 548 634 699Africa 58 91 146 205Latin America 48 64 79 87East Asia 135 1i6O 137 136South Asia 179 240 274 275

Source: Zachariah (1986), Table 3.

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2. What Type of Education to Provide?

"Education" is far from being a homogeneous entity. Even restricting

the notion to "formal" education, this can be offered at many levels (primary,

secondary, higher) and within level it can be of several types (e.g. general,

pre-vocational). As shown above, primary education is, as a rule, the first

choice among the alternative educational levels to be expanded in developing

countries. Beyond compulsory schooling, a variety of pre-vocational subjects

can be introduced to the curriculum, which can be of increased specialization as

the student progresses through the school system and until the graduate

possesses a vocational skill. But what is the choice among different curriculum

mixes, especially when taking into account the relative costs of offering

various subjects. Several studies have found, for example, that it costs twice

as much to offer a pre-vocational secondary school curriculum rather than a

purely academic one (e.g., Lauglo, 1985). The issue is: do the benefits

generated by vocational education exceed those of general education by a factor

of two? If they do not, as several studies have found (Psacharopoulos and

Loxley, 1985), what is the most socially efficient way of providing specialized

skills in a given economy -- in vocational institutions within the formal school

system or, perhaps, relegation of this function to specialized vocational

technical institutions and on-the-job training?

3. How to Enhance School Quality?

Again, education of any given level or type, can be offered at several

levels of "quality." Educational quality is manifested by at least three

indices: expenditure per pupil, school retention, and cognitive learning. On

all three counts the level of educational quality in today's developing world is

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appalling. Table 7 shows that what is spend per pupil in South Asia is less

than 1 percent of similar expenditure in advanced industrialized countries. In

Latin America, only 6 out of 10 entering stuLdents survive to the last grade of

primary school. And the level of reading comprehension in developing countries

in only one third that in advanced countries. Therefore, another critical issue

facing development planners is how to improve upon the low level of educational

quality offered in a cost-effective way. (There is of course the related issue

of tradeoff between the number of students enrolled and the quality of schooling

each of them receives).

Table 7: School Quality Indicators

Percentage AchievementExpenditure per pupil surviving to in reading

Region (US$) sixth grade comprehension(1) (2) (3)

Sub-Saharan Africa 2.24East Africa - 71West Africa - 70

Asia 57East Asia 2.47South Asia 1.68

Latin America & Caribbean 8.99 61Europe, Middle East,and North Africa 3.28 8C

Developing countries 4.80 68 9Developed countries 105.50 91 27

Source: Col. 1, UNESCO, Statistical Yearbook, 1983.Col. 2, UNESCO, (1984).Col. 3, Thorndike (1973).

Note: Expenditure refers to non-teacher inputs in primary schools.

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4. How to Finance Educational Expansion?

Increases in school coverage and improvements in educational quality

require additional resources relative to those presently spent on education.

Recent trends, however, indicate the contrary. Table 8 shows that the public

resources devoted to education (as a share of the public budget) have at least

stabilized, if not declined in many cases, especially in developing countries.

And there is no evidence that the share of private resources has compensated for

the shortfall in public spending. Thus another critical issue regarding the

prospects of human resource development in low income countries is: where will

the necessary resources for educational expansion and inprovements in its

quality come from? Given the constraints on generating additional public

resources, should private resources be tapped, especially where de facto

educational rationing coexists with the willingness of households to pay for

more and/or better education? Should there be a greater role for local

communities to finance their own education?

Table 8: Public Spending on Education as a Share of thePublic Budget, Major World Regions, 1965-80

(Percent)

Region 1965 1970 1975 1980

Africa 16.0 16.4 15.7 16.4Asia 14.2 13.1 12.2 12.7Latin America and Caribbean 18.7 18.9 16.5 15.3Europe, Middle East, andNorth Africa 12.4 12.5 11.5 12.2

Developing countries 16.1 15.8 14.5 14.7Developed countries 16.0 15.5 14.1 13.7

Source: UNESCO, Statistical Yearbook (various years).

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S. How to Improve Distributional Equity?

The equity aspect of education has at least two operational

dimensions. First, who gets access to schooling (by socioeconomic, cultural or

gender group) and second, who really pays and who benefits from public

educational expenditure. The first issue overlaps with the increased coverage

(efficiency) issue mentioned earlier. Namely, expansion of basic education in

rural areas will automatically cover less privileged groups of the population

and women. The second aspect of equity is more complicated, in the sense that

the present "free" education financing arrangements may in fact do a disservice

to the equity cause. The reason is that the relatively wealthier higher

education students appropriate considerably more public resources relative to

those who do not go to school at all or ternminate their studies at the primary

level, and who typically come from poorer families. For example, Table 9 shows

that in all world regions, higher education students receive most of the direct

public subsidies, i.e., in addition to the considerable indirect subsidies in

the form of free tuition. Therefore, a major challenge facing planners is how

to improve upon the equity aspects of present financing arrangements in

education.

Table 9: The Share of Direct Subsidies to Students in theRecurrent Education Budget, by Level, around 1980

(Percent)

Region Primary Secondary Higher

East Africa 2.5 21.9 24.5West Africa 3.5 20.1 47.0Asia 5.7 9.2 17.1Latin America 4.0 4.4 8.2Europe, Middle East,

and North Africa 0.7 7.1 16.7OECD countries 7.4 5.9 10.7

Source: UNESCO, Statistical Yearbook, 1984.Note: Figures refer to all forms of financial aid given directly to

students, such as room and board, transport, and medical services.

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IIt. The Role of International Agencies

The above list of critical issues preoccupies, one way or another,

every single Education Ministry in the developing world. Although panaceas in

the complex field of educational policy do aot exist, international agencies can

assist countries to address the above issues in a number of ways. The key to

such assistance is a collaborative effort and technical cooperation on at least

three fronts.

1. Country-specific Educational Assessments

Although the general trends described above apply worldwide,

individual countries differ in their initial conditions and hence the most

appropriate action to be taken in their particular case. For example, it was

mentioned that on the basis of global evidence, investment in primary education

should receive priority in developing countries. However, it could be that in

country X the relative scarcity of educated manpower are such that investment in

secondary, or even higher education, should receive priority. This issue can

only be resolved by means of country-specific analytical studies pooling

together an amount and type of information that is not normally or readily

available. Educational statistics and the analysis of learning processes are

still in their infancy in developing countries. Thus international agencies

could, by means of technical assistance, contribute to the generation of

policy-relevant information in countries where this is now lacking or is

inadequate.

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2. Development of Local Analytical Capacity

Examples of required information for rigorous educational sector

assessments are the unit costing of different types of education and training;

measures of the learning and productivity of graduates of various programs; and

the additions to cognitive learning imparted by different educational "inputs"

such as teachers' qualifications and textbooks. The information required is

quantitative rather that qualitative in nature, which in turn necessitates the

availability of professional expertise in statistics, education economics,

research design, measurement, data collection and analysis. It also

necessitates computers and qualified staff to operate them.

In this respect, technical assistance could be geared towards the

strengthening of local institutions and training individuals to conduct such

analyses, rather than relegating the task to parachute consultants. This could

be achieved by supporting particular university faculties and providing

fellowships for the creation of desired skil. profiles among local researchers.

Even better would be the creation of regional centers of excellence for

education, as they do exist for agriculture.

3. Sharing of International Experiences

International agencies are innundited with a wealth of information on

many aspects of the development process, e.g., what educational policy works in

what particular country, or what project has failed in what country and for what

reason. By contrast, such comprehensive information rarely reaches developing

countries, and when it does, it is already dated.

Thus international agencies could take the lead and establish a

network, the purpose of which would be to d[ffuse, on a regular and frequent

basis, syntheses of experiences on specific issues of human resource

developmient.

I

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REFERENCES

Cochrane, S.H., Fertility and Education: What Do We Really Know?Baltimore, Md.: Johns Hopkins University Press, 1979.

Cochrane, S.H., Leslie, J., and O'Hara D.J., "Parental Education and ChildHealth: Intra-Country Evidence," In The Effects of Education on Health,Washington, D.C.; World Bank, Staff Working Paper No. 405, 1980.

Denison, E., Why Growth Rates Differ: Post-War Experience in Nine WesternCountries, Washington, D.C.: The Brookings Institution, 1967.

Easterlin R. "Why isn't the Whole World Developed?" The Journal of EconomicHistory 41, No. 1 (March):1-19, 1981.

Jamison, D., and Lau, L. Farmer Education arid Farm Efficiency, Baltimore, Md.:Johns Hopkins University Press, 1982.

Lauglo, J. "Practical Subjects in Academic Secondary Schools: An Evaluation ofIndustrial Education in Kenya," Institute of Education, University ofLondon, 1985 (mimeo).

Marin, A., and Psacharopoulos, G., "Schooling and Income Distribution," Reviewof Economics and Statistics 58, No.3 (August): 332-38. 1976.

Psacharopoulos, G., "Educaticinal Research ai: the World Bank," The World BankResearch News, Vol. 9, No. 1, 1983: 3-L7.

Psacharopoulos, G., "The Contribution of Education to Economic Growth:international Comparisons," in J.W. Kendrick, ed. International Comparisonsof Productivity and Causes of the Slowdown, Ballinger, 1984: 335-60.

Psacharopoulos, G., "Returns to Education: A Further International Update andImplications," Journal of Human Resources, XX, No. 42, 1985: 583-604.

Psacharopoulos, G. and Loxley W., Diversified Secondary Education andDevelopment: Evidence from Colombia and Tanzania, Johns Hopkins UniversityPress, 1985.

Schultz, T.W., "Education and Economic Growth," In Social Forces InfluencingAmerican Education, edited by N.B. Henry, National Society for the Study ofEducation, pp. 46-88, Chicago: University of Chicago Press, 1961.

Thorndike, R., Reading Compreshension in Fifteen Countries, Halsted Press, 1973.

UNESCO, Evolution of Wastage in Primary Education in the World Between 1970 and1980, Division of Statistics on Education, Office of Statistics, October1984.

UNESCO, "The Current Literacy Situation in the World," Office ofStatistics, July 1985 (mimeo).

Zachariah, K.C., "Fertility, School Age Population and Enrollment Ratios," TheWorld Bank, PHN Department, 1986, (mimeo).