The full social returns to education: estimates based on countries' economic growth performance

This paper reports new estimates of the social returns to education, using countries' economic performance during 1960-85 to capture the externalities from education. The results confirm the social profitability of investing in education but indicate that the returns by level of education are sensitive to countries' economic context.

To interpret the results meaningfully it is useful to make a distinction between investments to maintain existing coverage, and investments to expand it. The findings relate mainly to the second type of investment decision in the context of the following observed initial gross enrollment ratios: 58 percent in primary education, 9 percent in secondary education, and 1 percent in higher education in low-income countries; 95 percent, 28 percent, and 4 percent, respectively, in middle-income countries; and 109 percent, 53 percent, and 9 percent, respectively, in high-income countries.

Given these initial levels of coverage, our results suggest that low-income countries benefited most from investments to expand primary education, while in middle-income countries, it was investments to expand secondary education that brought the highest social returns. In the high-income countries, investing to expand coverage in higher education yielded the best returns. Investments with poor social returns include expansion of higher education in low- and middle-income settings and expansion of secondary education in high-income settings.