UNIT 8. Rate of return in education.pptx

Rate of return in education

1. UNIT: 4 th The private and social return to human capital investment INSTRUCTOR : TANZELA BASHIR

2. The private and social return to human capital investment Human capital Economics the abilities and skills of any individual , those acquired through investment in education and training, that enhance potential income earning. T he collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community: Education is an investment in human capital that pays off in terms of higher productivity .

3. What is private return to education: The private rate of returns to education is the increase in the earnings from an additional year of education for an individual who makes the investment decision on education, while the social rate of returns to education measures the increase in national income resulting from the same year of education ( Borjas 2004 ). What is social return to education ? If education reduces crime, then schooling will have social benefits that are not taken into account by individuals. In this case, the social return to education may exceed the private return. Given the large social costs of crime, even small reductions in crime associated with education may be economically important.

4. What is private rate of return? Definition : The private internal rate of return is equal to the discount rate that equalizes the real costs of education during the period of study to the real gains from education thereafter. Jan 30, 2003 What is social rate of return? Definition: The social internal rate of return refers to the costs and benefits to society of investment in education, which includes the opportunity cost of having people not participating in the production of output and the full cost of the provision of education rather than only the cost borne by the individual. Jan 30, 2003 Why is it important to invest in education? Education reduces poverty, boosts economic growth and increases income. It increases a person's chances of having a healthy life, reduces maternal deaths, and combats diseases such as HIV and AIDS. ... In sum, education is one of the most important investments a country can make in its people and its future .

5. Why education is important for a country? Education reduces poverty, boosts economic growth and increases income. ... Education can promote gender equality, reduce child marriage, and promote peace. In sum, education is one of the most important investments a country can make in its people and its future. What are the benefits of education? Both on personal and national levels, education has been shown to increase economic growth and stability. One of the most important benefits of education is how it improves personal lives and helps societies run smoothly. We live longer, fuller, and happier lives as learned and knowledgeable individuals . Dec 8, 2016 What is the role of education? Main purpose of education is to educate individuals within society, to prepare and qualify them for work in economy as well as to integrate people into society and teach those values and morals of society. Role of education is means of socializing individuals and to keep society smoothing and remain stable.

6. Private and social return to education The returns to education increase productivity is of interest to economists and policymakers, because this issue has substantial implications regarding government subsidies for education and economic growth. It is evidenced that investment in human capital has a positive return, in fact, the average difference between the wages of a university graduate and a high school graduate is significant in most countries. Not only workers with a high level of schooling are paid more, but also this difference in earnings reflects the benefits of education and not a product of selection. The concept of private return to education can be synthesized through the evidence that individuals with more education earn higher wages than individuals with lower levels of education.

7. There are three main strands in the theory on externalities due to education: 1. positive private returns (signaling) to education and negative social returns to education. 2 . positive both private and social returns to education 3 . positive social returns to education that do not apply directly to the production process (Lange, Topel , 2006). In the first case, private returns are positive due to the fact that education improves the possibilities in the job market for an individual, but it doesn’t increase the productivity of the society.

8. In the second case, persons with greater skill may raise the productivity of others with whom they interact, so accumulation of human capital may increase total factor productivity in an economy. This second case is important because it can be understood if the government participation in education has a rationale of efficiency . A third strand of literature highlights potential external benefits of education that do not apply directly to the production process is linked to the fact that education enables individuals to participate more efficiently in the political process. . S ocial return external to the production process is consumption externalities due to education.

9. Benefits of education in developing countries Ending poverty. ... Promoting health. ... Providing equal access to good education for all. ... Promoting gender equality. ... Ensuring sanitation and clean water. ... Encouraging economic growth. ... Reducing inequalities within and among different countries. ... Making cities and communities more sustainable .

10. Education and economic growth Education is well known to be the primary tool that promotes economic development, economic growth. Education plays a significant role in the development of human capital and enhances economic growth through productivity, provision of skills, creativity and innovation and competitiveness. There is a direct contribution of education to economic growth, especially at higher levels. This is achieved through the creation of ideas and knowledge and innovations of technology which make workers more productive . A nation that aims to attain massive economic growth must give proper consideration to quality education to the majority of its entire population. The sector of education is the one responsible for ensuring output per worker is added, and this can result in growth in the economy

11. EDUCATION AND PRODUCTIVITY High school education and higher learning institutions have significant contribution in the establishment of essential government institutions such as the financial organizations, the law firms, agricultural research firms, health institutions among others. These key institutions are significant for the achievement of economic growth. Studies micro and macro clearly show the relationship between education and production output At the level of micro, several findings show that the more a person gets educated, the more the income generated. So, the rate of return is directly proportional to the level of education .

12. In the agricultural sector, findings indicate a positive relationship between education and productivity especially among farmers who use modern techniques, but there is a less effect on those utilizing traditional techniques. Education also plays a significant role in promoting technological advancement and adoption in industries. Taking for example, in Sri Lanka, statistical findings in the engineering and clothing firms indicated a positive relationship between the technical change of the firm and the level of skills and education of employees and investors. Therefore , there is a direct relationship between education and productivity in general since productivity increase with higher education. Education affects export growth; as a result, influencing the overall rate of growth.

13. EDUCATION AND INCOME Education has a positive effect on income inequality which successively supports higher growth rates. Broadly oriented education enables people with low income to search for more economic opportunities to venture.

14. Education & Inequality Economics of Education

15. Equality and Inequality in Education Equality in Schools All students have access to the same resources and the same opportunities Equity in education Resources and opportunities are created to afford equal results in education

16. How we define inequality.

17. What do we mean when we say inequality E conomic Inequality is the state of affairs in which assets, wealth, or income is distributed unequally among individuals in Pakistan. Pakistan being part of the four nations housing the highest number of billionaires, a shocking 4 billion people in Pakistan live below the poverty line and living on less than 50 cents per day.

18. Factors of inequality Growth factor . Highly unequal asset distribution . Inadequate employment generation. Differential regional growth . Effects Damaging to helpless populations. Intergenerational inequality . Stop the flow of cash Ill health problems increased Decreased in net reduction in educational attainment Economic instability

19. Education System Needs to Reduce Inequality Plot a clear strategy to improve the education experience for all students and narrow inequality gap. ... Hold to equally difficult standards for all classrooms. ... Put a focus on teachers as a central force for change in the education system. ... Equalize the share of resources among all school systems.

20. How does inequality affect education An increase in income disparity has been more than matched by an increasing gap between the money that low- and high-income parents spend on enhancement activities for their children. Most distressingly, increasing gaps in academic achievement and educational attainments have attended the growth in income inequality . Mar 28, 2014

21. Conclusion Inequality is still very much a fact of life in India. Result of deep-rooted social and economic structures that perpetuate privilege and limit opportunities for the poor

22. REFERENCES E. Moretti , "Human Capital Externalities in Cities," NBER Working Paper No. 9641, April 2003, and Handbook of Regional and Urban Economics, Amsterdam: North Holland-Elsevier, 2004 . 5. L. Lochner and E. Moretti , "The Effect of Education on Criminal Activity: Evidence from Prison Inmates, Arrests and Self-Reports," NBER Working Paper No. 8605, November 2001, and American Economic Review, 94 (1), (2004 ). 6. J. Currie and E. Moretti , "Mother's Education and the Intergenerational Transmission of Human Capital: Evidence from College Openings," NBER Working Paper No. 9360, December 2002, and Quarterly Journal of Economics, 118 (4), (2003 ). Montenegro, C. E., and H. A. Patrinos . 2014. Comparable Estimates of Returns to Schooling Around the World. World Bank Policy Research Working Paper Series 7020. Munich, Daniel, and George Psacharopoulos . 2018. The External and Non-Market Benefits of Education: A Review. EENEE, Analytical report No. 3/2017.Oreopoulos , P. 2006. “Estimating Average Guiga , H., & Rejeb , J. (2012). Poverty, growth and inequality in developing countries. International Journal Of Economics & Financial Issues (IJEFI), 2(4), 470-479 . Reale , E., & Seeber , M. (2011). Drivers of inequalities in higher education and the unexpected consequences of equality policies. Higher Education Policy, 24(2), 185-211. UNESCO. (2012). EFA Global monitoring report. Paris: UNESCO. UNESCO. (2013). World inequality database on education. Retrieved from http://www.education-inequalities.org