Investment in Education in Developing Nations: Policy Responses When Private and Social Signals Conflict.

Overview & Synopsis

In most developing countries the net private benefit of higher education exceeds its net social benefit because education-related wage differentials are excessive and the beneficiaries of higher education are subsidized. The resulting political pressures seem to favor investment in education over the creation of employment opportunities. A more balanced allocation of investment may require the revision of basic policies dealing with wage determination, the incidence of educational costs, and the role of private sector education. The aim should be to narrow the gap between private and social signals and thus reduce excess private demand for higher education. (Author)