Social returns to education

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Intergenerational return to human capital

Better educated parents invest more time and money in their children, who are more successful in the labor market

10.15185/izawol.19 19 Devereux, P

by Paul J. Devereux

Governments invest a lot of money in education, so it is important to understand the benefits of this spending. One essential aspect is that education can potentially make people better parents and thus improve the educational and employment outcomes of their children. Interventions that encourage the educational attainment of children from poorer families will reduce inequality in current and future generations. In addition to purely formal education, much less expensive interventions to improve parenting skills, such as parental involvement programs in schools, may also improve child development.

School tracking and intergenerational social mobility

Postponing school tracking can increase social mobility without significant adverse effects on educational achievement

10.15185/izawol.56 56 Pekkarinen, T

by Tuomas Pekkarinen

The goal of school tracking (assigning students to different types of school by ability) is to increase educational efficiency by creating more homogeneous groups of students that are easier to teach. However, there are concerns that, if begun too early in the schooling process, tracking may improve educational attainment at the cost of reduced intergenerational social mobility. Recent empirical evidence finds no evidence of an efficiency–equality trade-off when tracking is postponed.

Do higher levels of education and skills in an area benefit wider society?

Education benefits individuals, but the societal benefits are likely 
even greater

10.15185/izawol.130 130 Winters, J

by John V. Winters

Formal schooling increases earnings and provides other individual benefits. However, societal benefits of education may exceed individual benefits. Research finds that increased average education levels in an area are correlated with higher earnings, even for locals with relatively little education. Science, technology, engineering, and mathematics (STEM) graduates appear to have especially strong external effects, due to their role in stimulating innovation and economic growth. Several strategies to test for causality find human capital externalities do exist.

The impacts of shortening secondary school duration

Shortening secondary school duration may increase the skilled workforce in aging societies

10.15185/izawol.166 166 Thomsen, S

by Stephan L. Thomsen

The main goal of secondary school education in developed countries is to prepare students for higher education and the labor market. That demands high investments in study duration and specialized fields to meet rising skill requirements. However, these demands for more education are in opposition to calls for early entry to the labor market, to lengthen working lives to meet the rising costs associated with an aging population and to enable the intergenerational transfer of skills. One way to lengthen working lives is to shorten the duration of secondary school, an option recently implemented in Canada and Germany. The empirical evidence shows mixed effects.

The role of preschool in reducing inequality

Preschool improves child outcomes, especially for disadvantaged children

10.15185/izawol.219 219 Waldfogel, J

by Jane Waldfogel

Children from disadvantaged families have lower levels of school readiness when they enter school than do children from more advantaged families. Many countries have tried to reduce this inequality through publicly provided preschool. Evidence on the potential of these programs to reduce inequality in child development is now quite strong. Long-term studies of large publicly funded programs in Europe and Latin America, and newer studies on state and local prekindergarten programs implemented more recently in the US, find that the programs do improve outcomes for young children, particularly for those from disadvantaged families.

Female education and its impact on fertility

The relationship is more complex than one may think

10.15185/izawol.228 228 Kim, J

by Jungho Kim

The negative correlation between women’s education and fertility is strongly observed across regions and time; however, its interpretation is unclear. Women’s education level could affect fertility through its impact on women’s health and their physical capacity to give birth, children’s health, the number of children desired, and women’s ability to control birth and knowledge of different birth control methods. Each of these mechanisms depends on the individual, institutional, and country circumstances experienced. Their relative importance may change along a country’s economic development process.

Do skills matter for wage inequality?

Policies to tackle wage inequality should focus on skills alongside reform of labor market institutions

10.15185/izawol.232 232 Broecke, S

by Stijn Broecke

Policymakers in many OECD countries are increasingly concerned about high and rising inequality. Much of the evidence (as far back as Adam Smith’s The Wealth of Nations) points to the importance of skills in tackling wage inequality. Yet a recent strand of the research argues that (cognitive) skills explain little of the cross-country differences in wage inequality. Does this challenge the received wisdom on the relationship between skills and wage inequality? No, because this recent research fails to account for the fact that the price of skill (and thus wage inequality) is determined to a large extent by the match of skill supply and demand.

Age at school entry: How old is old enough?

A child’s age at school entry matters, and the implications of policy changes can have long-lasting effects

10.15185/izawol.247 247 Dhuey, E

by Elizabeth Dhuey

Laws on age at school entry affect student achievement and often change for a number of reasons. Older students are more mature and ready to learn. This can have positive impacts on academic, employment, and earnings outcomes. The costs of holding children back include another year of childcare expenses or income forgone by the caregiver parent. Entering the workforce one year later also has implications for lifetime earnings and remittances to governments. School-entry policies could be a useful tool in increasing student achievement, but the short- and long-term impacts need to be better understood.

Can higher education reduce inequality in developing countries?

Expanding higher education might solve rising youth unemployment and widening inequality in Africa

10.15185/izawol.273 273 Shimeles, A

by Abebe Shimeles

Developing countries often face two well-known structural problems: high youth unemployment and high inequality. In recent decades, policymakers have increased the share of government spending on education in developing countries to address both of these issues. The empirical literature offers mixed results on which type of education is most suitable to improve gainful employment and reduce inequality: is it primary, secondary, or tertiary education? Investigating recent literature on the returns to education in selected developing countries in Africa can help to answer this question.

How do adult returns to schooling affect children’s enrollment?

Raising future expected monetary gains to schooling and poor families’ current incomes promotes school enrollment in developing countries

10.15185/izawol.305 305 Swinnerton, K

by Kenneth A. Swinnerton

Universal completion of secondary education by 2030 is among the targets set by the United Nations’ Sustainable Development Goals. Higher expected adult wages traced to schooling may play a major role in reaching this target as they are predicted to induce increased school enrollment for children whose families wish to optimally invest in their children’s future. However, low incomes and the obligation to meet immediate needs may forestall such investment. Studies suggest that school enrollment in developing countries is positively correlated with higher expected future wages, but poor families continue to under-enroll their children.