Returns to investment in education: a decennial update and review of the literature

• In Event: Fifty years of comparative studies of educational returns: a panel in honor of Martin Carnoy and George Psacharopoulos

Abstract

Returns to investment in education based on human capital theory have been estimated since the late 1950s. In the 60-plus year history of estimates of returns to investment in education, there have been several reviews of the empirical literature. This paper reviews the literature and highlights trends and patterns. A large database of 116 countries is built. The review shows that the average global rate of return to schooling is 9.6 percent a year, down slightly over time. Returns to primary schooling remain high, signaling expansion and improvements in quality at the basic level remains a priority. At the same time, returns to higher education have increased. Estimates of social rates of return are becoming harder to come by, as researchers are no longer estimating full discount patterns. However, without taking into account the cost of education it is difficult to point to priorities for public policy. Women continue to experience higher average rates of return to schooling, again showing that girls’ education is a priority. However, when disaggregated, returns to primary education are lower for women, signaling a disincentive to advance to higher levels.

Authors

• Harry Patrinos, The World Bank

• George Psacharopoulos, Georgetown University