Friday, November 02, 2012

Indicators of the Burden of Too Little Schooling

A comparative indicator of the performance of school systems might be useful. Such an indicator might be constructed as follows. The proposed indicator focuses on the economic impacts of schooling, admittedly a partial indicator (that fails to include many of the benefits of schooling).

Divide the population into groups according to grades completed on leaving school. For each group, estimate the average age on leaving school. From a population survey estimate the current annual earnings of people of each group. The following table is an illustration of results from such a survey done in the United States.

Calculate the present value of the stream of earnings for each group (by grade completed)  using a reasonable discount rate (say 3%).

Estimate the number of people leaving school in the current calendar year for each of the groups used in the above calculation. Multiply the number of people per group by the present value of the stream of earnings for the group, and sum across groups.

Two countries can be compared by various means. They will in general differ according to the income levels achieved by the groups over time, and by the proportion of the population with each amount of schooling.

Consider two "burdens" of a country -- say country A -- with respect to a model, comparison country -- say country B. For example, one could consider the burdens of an African nation such as Uganda as compared with a successful African nation such as South Africa). The deficit will consist of two components:
  1. People will in general leave school having completed more grades in the successful than in the target nation. One burden, the burden of inadequate schooling, will be the total loss in present value of future income attributed to early school leaving.
  2. The income levels for people at the same level of school education will generally be higher for the more successful country. The second burden, the burden of leaving school and entering a less developed economy, will be the total loss of future income attributed to the lower productivity and thus lower remuneration in the less developed economy.
While a more educated population will in general contribute to a more productive economy, other factors will also do so.

The total burden will be the sum of these two components, adjusted for their interaction.


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