• Rates of return

Rates of return to education

In the last two decades, many countries in Africa have had difficulty extending primary and secondary schooling to an increasing fraction of their youth, or in building high quality university training and parallel research institutions. Opinion is divided on how to refocus resources and determine priorities to improve the prospects for the future.

This paper reviews some of the economic arguments for specific policies and examines empirical evidence from household surveys (collected from 1985 to 1999 in Ghana, Côte d’Ivoire, Kenya and South Africa, Nigeria and Burkina Faso) which may help assess the claims and counter-claims advanced for various proposals.

The author estimates the “private returns to schooling” – the financial benefits obtained from having a particular level of education, expressed as the rate of return on an investment. The paper finds that the wage gains associated with each year of education range from around 5 to 20 per cent. Returns are highest at the secondary and post-secondary levels, and are similar for women and men. The gender gap in schooling remains large in Côte d’Ivoire, Ghana, Nigeria and Burkina Faso, but is not evident in South Africa.

The paper argues that the large public subsidies for post-secondary education in Africa are not needed to motivate students to enrol, and those who have in the past enrolled in these levels of education are disproportionately from the better-educated families. Policy recommendations include that higher education in Africa could be more efficient and more equitably distributed if the children of well-educated parents paid the public costs of their education. The money from these fees could be used to expand higher education and pay for fellowships for children of the poor and less educated parents.

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