Page 19 - Education for Development:George Psacharopoulos University of Illinois at Urbana-Champaign, USA

Education for Development: What Policies?c17

(United Nations, 2014).

Beyond health, it has been found that each additional year of education
on average reduces a country’s chances of falling into civil war by 3.6 percent
(Winthrop and Graff, 2010).

Combining micro and macro estimates, Breton (2010, 2011) reports that an
externalities-inclusive rate of return on investment in schooling in the lowest-
income countries exceeds 35%.

Including just one non-market effect, reduced mortality, Pradhan et al.
(2018) report that the wide-social rate of return to eone exstra year of schooling
in low income countries could be 16%, relative to a narrow social rate of 11%.
The distinction between narrow and wide social returns is more than

theoretical. By adding externalities to the narrow-social returns, one can reach
diametrically opposite policy conclusions, e.g., if primary and tertiary education

have differential externalities, by considering the latter the ranking of profitable
education investments could be reversed.

Institutions

Following the work of North (1990), there has been a lot of work on the

importance of institutions in economic growth (Acemoglu et al., 2005). There
are several ways a country’s institutions affect the formation of human capital.
Education does not operate in a vacuum. The environment in which schools

and universities operate is heavily influenced by the country’s political and
other institutions. Education policies typically try to fix a problem by narrowly
focusing on one component of the education system, abstracting from a host of

non-education factors that may prevent or assist in the policy success. Classic
omission of such factors relate to institutions.