Education economics
Typically in European countries, most education expenditure takes the form of government consumption, although some costs are also borne by individuals.
[5] In 2018, the US spent approximately 5% of its GDP on K-12 public education, placing the US as the 7th highest spender per student compared to other OECD nations.
In the case of human capital calculating returns is more complicated – after all, we cannot separate education from the person to see how much it rents for.
A strong correlation between GDP and education is clearly visible among the countries of the world, as is shown by the upper left figure.
However, Hanushek found that scores on internationally standardized tests of student achievement do better in explaining economic growth than years of schooling, as discussed further below.
Multiple studies have found that investing in the education of poor children on average substantially reduces their risk of poverty as adults and increases their life expectancy.
Usually when speaking of externalities one thinks of the negative effects of economic activities that are not included in market prices, such as pollution.
The central idea is that undertaking education is investment in the acquisition of skills and knowledge which will increase earnings, or provide long-term benefits such as an appreciation of literature (sometimes referred to as cultural capital).
[19] An increase in human capital can follow technological progress as knowledgeable employees are in demand due to the need for their skills, whether it be in understanding the production process or in operating machines.
There also seems to be a correlation between gender differences in education with the level of growth; more development is observed in countries that have an equal distribution of the percentage of women versus men who graduated from high school.
When looking at correlations in the data, education seems to generate economic growth; however, it could be that we have this causality relationship backwards.
Educational advance is not the only variable for economic growth, though, as it only explains about 14% of the average annual increase in labor productivity over the period 1915-2005.
[22] An alternative model of the demand for education, commonly referred to as screening, is based on the economic theory of signalling.
Marx and Engels understood education and free time as essential to developing free individuals and creating many-sided human beings, thus for them education should become a more essential part of the life of people unlike capitalist society which is organized mainly around work and the production of commodities.
One notable inequality that arises from differences in funding is the ability of wealthier schools to afford more qualified educators who are more experienced and can improve student test results.
to measured outputs including subsequent labor market success, college attendance, graduation rates, and, most frequently, standardized test scores.
The original study that eventually prompted interest in the idea of education production functions was by a sociologist, James S. Coleman.
The Coleman Report, published in 1966, concluded that the marginal effect of various school inputs on student achievement was small compared to the impact of families and friends.
[34] Later work, by Eric A. Hanushek, Richard Murnane, and other economists introduced the structure of "production" to the consideration of student learning outcomes.
[35] A large number of successive studies, increasingly involving economists, produced inconsistent results about the impact of school resources on student performance, leading to considerable controversy in policy discussions.
Text taken from Investing against Evidence: The Global State of Early Childhood Care and Education, 15, Marope, P.T.M., Kaga, Y., UNESCO.
