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Working Paper

IDS working papers;24

Rates of Return to Education in Asia: A Review of the Evidence

Published on 1 January 1995

In his most recent (1993) global update of returns to investment in education, George Psacharopoulos (GP) states that the “rates of return patterns established in earlier reviews are upheld” (see Psacharopoulos, 1993: abstract).

The four most important patterns are:

  1. The rates of return to education (henceforth ROREs) for all levels of education generally exceed the aggregate social opportunity cost of capital;
  2. The private and social ROREs are highest for primary education and that “returns decline by level of schooling” (ibid);
  3. The gap between private and social ROREs to higher education is usually considerably higher than the equivalent gaps for primary and secondary education;
  4. The pattern of ROREs remains stable as countries develop with only relatively minor declines in ROREs over time. Thus, “investment in education continues to be a very attractive investment opportunity” (ibid).

The evidence for the existence of these four patterns is based mainly on aggregate social and private ROREs by level of education (primary, secondary and higher) for each of the main geographical regions (see Table 1). The pervasiveness of these patterns has now become the established orthodoxy in virtually all publications and discussions concerning investment priorities for education in developing countries.

The World Bank’s 1995 Education Sector Review relies very heavily on rates of return analysis and the findings of GP’s global updates in support of three of its six major policy recommendations, namely that there should be higher priority to education, greater attention to outcomes, and public investment should be focused on basic education (see IBRD, 1995).

Authors

Paul Bennell

Research Fellow

Publication details

published by
IDS
authors
Bennell, Paul
journal
IDS Working Paper, issue 24
isbn
1 85864 063 6
language
English

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