Rates of return as informer of public policy |
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| Authors: | Larry L Leslie |
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| Institution: | (1) College of Education, 327 Education Building, Tucson, USA;(2) University of Arizona, 85721, Arizona, USA |
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| Abstract: | Policy makers often employ rate of return (RoR) information in formulating public resource allocation decisions. A noteworthy present example is the World Bank, which uses RoR to advise Third World countries (TWCs) as they set student subsidy levels, tuition levels, and allocations by level of education (i.e., elementary, secondary, higher). This paper demonstrates that in the main RoR may be inappropriate policy devices for such aims because (1) major validity problems surround RoR formulations, (2) emphasis upon average RoR may misinform policy, and (3) RoR calculations are more sensitive to cost than benefits variations. It is concluded that true RoR to education are higher than conventionally estimated and in most cases support increased public resource allocations to various levels of education. Further, RoR evidence does not support reallocations from higher to lower educational levels, and World Bank advice to TWCs, most notably sub-Saharan Africa, may be in error. |
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