« The CPI release: blip, counter-blip, or the beginning of the parity pass-through? | Main | A public finance vignette »

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

What, if anything, do these graphs suggest about the direction a gov't should take in terms of the balance of who pays for PSE?

For example, if I was to look at the last graph, and compared women in France (Pub ROI 180%, Pri ROI 0%) with women in Canada (Pub ROI 50%, Pri ROI 50%), could I conclude that the French gov't could pick up a larger portion of the total costs (reducing private portion of tuitions etc) - shifting the FRA data point to the left and up towards CAN?

That's the sort of conclusion I would draw. Although the key point to remember is that you don't get the public ROI if all you're doing is giving money to people who were going to go to university anyway. That increased spending has to be on persuading people to take up PSE.

Great charts Stephen! And good point in the comments about the need for increase spending to be on people who wouldn't otherwise take up PSE.

Although I know you're going to disagree vociferously, shouldn't tuitions be kept low as a method to encourage people to attend PSE?

Fascinating topic, intriguing data.

Are individual incomes or household incomes used to determine private benefits to education? I ask because, private benefits to women may come through household income not personal income.

Along similar lines, I would suggest that the home production contribution of post-secondary educated (PSE) women is higher than the home production contribution of PSE men. In this exercise, those benefits are not measured, not to suggest that they would they easy to estimate.

I would also point that in many northern European countries, high productivity levels are consumed as leisure, e.g., long periods of vacation. In theory, some of this increased leisure time is used in a manner that reduces demands on the welfare state, e.g., better health through increased physical exercise.

If northern European are like North Americans, PSE workers there are exhibiting lower rates of obesity and tobacco smoking which should translate into higher economic output and less demand of welfare state services.

Of course, all this assumes that PSE doesn't just serve as an (expensive) signalling mechanism.

Bob Smith: Would you regard tobacco smoking and obesity as expensive signalling mechanisms?

Well, smoking and obesity are expensive (what's a pack of smokes going for these days?), but they're not signalling mechanisms in that they don't simply signal that a person has an underlying attribute (poor health) they actually cause that underlying attribute. I suppose that they could be used as a signalling mechanism in other contexts. For example, if smoking is correlated with not-going to university, being a smoker may be an indicator that you're not university educated. But typically that's not a really useful signalling mechanism, since you can just as readily (and at far lower cost) just pull out your university degree or your old Queen's T-shirt to signal that you're a university grad.

On the other hand I'll bet you've heard someone say "I'm going to university so that I can get a good job when I graduate". The question is, does PSE actually make people better workers (helping them get a good job) or does it just serve to help identify the people who already have the traits to make them better workers (smart, hard working, willing to jump through the requisite hoops to be a good middle manager), therefore helping them get good jobs. Similarly, are people healthier because they go to university or are people who would be healthier anyways more likely to go to university (for example, because they were raised in wealthier/healthier/better-educated families). If you believe that going to university makes people better workers or healthier people, than money spend on PSE may be socially beneficial as it produces higher incomes by producing better workers (or healthier people). If you believe that people who go to university are the people who would be better workers or healthier people anyways, money spent on PSE is privately beneficial (as it helps the good workers distinguish themselves from "bad" workers and the healthy people distinguish themselves from the unhealthy people), but it is socially wasteful because it doesn't actually make them better workers or improve their health.

It's an important distinction, because unless you can disaggregate the extent to which post-secondary education causes higher incomes or greater health and the extent to which it is merely corelated with those outcomes (as a result of unknown hidden variables like intelligence, work-effort, etc) you're probably going to overstate the social benefits of spending on post secondary education. My own suspicion is that, to a large degree (though not entirely), the social benefits of PSE are illusory, as they merely reflect the fact that people who go to university or colelge are likely to be more productive workers or healthy people than people who don't go to university. I'm certain that the OECD study (which makes no effort to control for this fact) badly overstates the social return of post-secondary education.

A couple thoughts:

- I'm assuming the private benefit of university is an observable monetary benefit. In other words, if people enrol in university in part because they like to learn, or perhaps to better themselves in pursuits that do not generate income (e.g. homemaking), your graphs underestimate the private benefit of attending university. This could be why French women attend university. Or perhaps the private cost is not entirely borne by the individual receiving the benefit (e.g. they receive a scholarship or help from Mom and Dad).

- I think it's a stretch to argue there are public benefits from university attendance. The fact that university grads pay higher taxes is a result of how the tax system is designed (i.e. people who earn higher incomes are taxed more), not really a result of university attendance in and of itself. If we had a head tax system, for example, university attendance wouldn't seem to have any public benefit at all.

David: "I think it's a stretch to argue there are public benefits from university attendance. The fact that university grads pay higher taxes is a result of how the tax system is designed (i.e. people who earn higher incomes are taxed more), not really a result of university attendance in and of itself. If we had a head tax system, for example, university attendance wouldn't seem to have any public benefit at all."

If you accept that university education makes people better (i.e., higher earning) workers, than there is a public benefit to it GIVEN that we raise revenue through income (and consumption) taxes (in that people who earn more money pay more income and, typically, consumption tax). You're right, there wouldn't be that kind of benefit if we had a head tax, but given that we don't have a head tax, that's sort of a moot point.

As I noted above, though, there's no public benefit to PSE if it just identifies people who are better workers (without actually making them better workers), since in that scenario those people would pay more income tax regardless of whether they went to university or not.

Bob Smith,
If I understand you correctly, you're arguing that if university is just used as a signalling mechanism and doesn't increase the graduates' work effort or abilities, then it doesn't have an effect on productivity. However, surely, if this signialling mechanism didn't exist, then there would be some losses incurred in the economy by the lack of a good signal of workers' producitivity. Productive people would have a hard time getting good jobs and unproductive people would too often be placed in high-paying jobs. I can immagine that the costs of constantly hiring and firing would outweigh alternative costs of the university degree.

The comments to this entry are closed.

Search this site

  • Google

    WWW
    worthwhile.typepad.com
Blog powered by Typepad