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This book analyzes the policy issues facing educational planners, administrators and policy makers in developing countries in choosing between alternative strategies of educational investment. It draws on the World Bank's twenty years of experience in education sector analysis and research to discuss both theoretical and practical problems of analyzing investment choices. The topics covered include: the contribution of education to economic and human development, criteria for investment, cost-benefit analysis, demand for educated manpower finance, internal efficiency and quality, equity considerations and the links between investment in education and investment in other sectors. No comparable work exists which deals solely with the problems of analyzing education investment in developing countries. While written for those involved in policy formulation and planning, it does not assume a high degree of technical knowledge of economics.
Using a recent inter-country sample, impacts of population increase, short-run growth rate, and educational level and inequality on income distribution are assessed. As in almost all other studies, high population increase is observed to be a disequalizer. However, unlike the position indicated in several earlier studies, rapid short-run economic growth seems to reduce income inequality. While higher mean schooling level appears to be a mild equalizer, contrary to the results reported by earlier researchers, no adverse effect of educational inequality on income distribution is found.
In this paper the author adds some further empirical tests of his theory of income distribution. This theory (cf. this Review, Series 16, Number 3, September 1970, p. 221 ff) sees income distribution as the distribution of prices of production factors, especially labour, of different quality and prices as the effect of demand and supply factors. The quality of labour is represented only by the number of years of schooling. Its supply is described by the actual numbers of people having each of the possible years of schooling; this frequency distribution can be characterized by its average and by some measure of its dispersion or by one of its deciles (in particular the highest) expressed in terms of its median. The demand for the various qualities of labour can be supposed to be reflected by (i) total demand for commodities, but (ii) more accurately by the percentage of third-level educated people used in and weighted by the size of the four main sectors of production: agriculture, manufacturing, trade and transport, and other services. Extensive material collected and reworked by Professors B. R. Chiswick for the U.S.A. and Canada and T. P. Schultz and L. S. Burns with H. E. Frech III for the Netherlands is used in cross-section tests to explain variations in income distribution in the states of the U.S.A. and the provinces of Canada and the Netherlands. The results can be found in the tables. While further increase and smaller dispersion in years of schooling, according to some of the findings presented, would only moderately reduce the degree of inequality in the U.S.A. and Canada, more result seems to be possible according to other findings, including those for the Netherlands. In the latter category the second demand index mentioned above has been used. This paper is one of several devoted in various ways to the testing of the same theory.
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