Private and Social Returns to Education in Labour Surplus Economies

Abstract

[Excerpt] The purpose of this paper is to consider the cost-benefit criterion for resource allocation in labour surplus economies calling particular attention to the contrasts with full employment economies. The specific plan is as follows. Section 1 reviews the debate over the applicability of cost-benefit analysis to problems of investment in education. Section 2 draws two important distinctions which are not always clear to educational planners and enumerates the likely benefits, both private and social, from education. Section 3 considers the case of full employment economies. Section 4 looks at the private returns to education in labour surplus economies in relation to the demand for education. Section 5 considers the social costs and benefits in labour surplus economies. Section 6 raises the problems of measuring marginal social rates of return and demonstrates the inadequacy of wage differentials as a measure of marginal social benefit. Section 7 summarizes the main points.