Abstract
The paper constructs a direct output measure of the education sector for Canada and uses the measure to examine its productivity performance. It makes an explicit quality adjustment of the output of the education sector by proposing and implementing a hedonic approach. The approach represents a practical approach for the quality adjustment in education output and can be applied using the existing data from statistical agencies. The measurement of education output in the paper is predicated on the notion that the output of the education sector represents investment in human capital and it has two variants. The income-based approach measures investment in education as increments in the future stream of earnings arising from education. The cost-based approach measures investment as total expenditures related to education.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Liu (2011) estimated the stock of human capital as the present discounted value of market lifetime income for selected OECD countries.
Fraumeni et al. (2008) provided a brief survey of methodologies used in a number of countries that are based on either student enrolments or the number of graduates.
The number of years m that is required to obtain an education level depends on students’ ages. The year of education of younger students within the education level is calculated by inference. It is assumed that older students are equally distributed among the various years of education in the education level (for details, see Gu and Wong 2010).
Capital cost in the education sector is restricted to capital consumption in the National Accounts and does not include a return to capital.
In a more integrated account, investment in education is added to nominal GDP and nominal GDP will increase significantly as a result. For example, nominal GDP adjusted for investment in education would increase by 34 % in 2005.
To the extent that the portion of the difference between investment in human capital from education between male and female students is due to discrimination, the weights used to weight enrolments for females are too low. The volume index of investment in education that is based on investment in education adjusted for discrimination should be higher.
Allen (1998) breaks down total costs of universities in British Columbia between different functions. He finds that 67 % of the total costs in academic year 1989/90 is linked to teaching, the remainder 33 % is attributed to research and services. The cost shares are used for aggregating reach and teaching components of the university output.
This is the third option as discussed in Diewert (2011).
Diewert (2011) presented a complete list of factors that might be expected to affect the quality of education output. The use of information and communication technologies (ICTs) are also expected to affect the quality of education as ICTs are found to contribute to the productivity and the output growth in service sectors for Canada, the United States and other developed countries (Stiroh 2002; Rao et al. 2010).
Alternatively, the dependent variable Y can be defined as the expenditure spent on a specific education level while the corresponding dummy variable for an education level are set to equal to one for that individual obtains that individual or zero otherwise.
The OECD Program for International Student Assessment (PISA) survey provides alternative data source for estimating changes in education quality over time.
References
Abraham K (2010) Accounting for investments in formal education. Washington, D.C. Bureau of Economic Analysis. Paper presented to the Bureau of Economic Analysis Advisory Committee
Allen R (1998) Paying for university education in B.C. Discussion Paper no 98-07. Department of Economics, University of British Columbia
Atkinson AB (2005) Atkinson review final report: measurement of government output and productivity for the national accounts. Palgrave Macmillan, New York
Coulombe S, Tremblay J-F, Marchand S (2004) Literacy scores, human capital and growth across fourteen OECD countries. Statistics Canada Catalogue no. 89-552-M. Ottawa, Ontario. International Adult Literacy Survey Series. No. 11
Diewert E (1976) Exact and superlative index numbers. J Econom 4(2):115–146
Diewert E (2011) Measuring productivity in the public sector: some conceptual programs. J Prod Anal 36(2):177–191
Emery H (2004) Total and private returns to university education in Canada: 1960–2030 and in comparison to other post-secondary training. Department of Economics, University of Calgary, Calgary, Alberta
Eurostat (2001) Handbook on price and volume measures in national accounts. Luxembourg, Germany, European Communities. Luxemberg: Office for Official Publications of the European Communities
Fraumeni BM, Reinsdorf MB, Robinson BB, Williams MP (2008) Price and real output measures of the function of government: exploratory estimates for primary and secondary education. Cambridge, Massachusetts. National Bureau of Economic Research. NBER working paper no. 14099
Gingras Y, Larivière V, Robitaille JP (2008) Bibliometric measurement of academic research: issues and possibilities. Observatoire des sciences et technologies. Presentation at the Annual Conference of the Canadian Institutional Research and Planning Association. Québec City
Green DA, Riddell WC (2007) Literacy and the labour market: the generation of literacy and its impact on earnings for native-born Canadians. Statistics Canada Catalogue no. 89-552-M. Ottawa, Ontario. International Adult Literacy Survey Series. No. 18
Gu W, Wong A (2010) Estimates of human capital in Canada: the lifetime income approach. Statistics Canada Catalogue no. 11F0027 M. Ottawa, Ontario. Economic Analysis Research Paper Series. No. 62
Hanushek EA, Zhang L (2006) Quality-consistent estimates of international returns to skill. Cambridge, Massachusetts. National Bureau of Economic Research. NBER working paper no. 12664
Jorgenson DW, Fraumeni BM (1989) The accumulation of human and nonhuman capital. In: Lipsey RE, Stone Tice H (eds) The measurement of saving, investment and wealth. University of Chicago Press, Chicago, Illinois, pp 227–281
Jorgenson DW, Fraumeni BM (1992) The output of the education sector. In: Griliches Z (ed) Output measurement in the service sector. University of Chicago Press, Chicago, Illinois, pp 303–338
Jorgenson DW, Fraumeni BM (1996) Investment in education and U.S. economic growth. In: Jorgenson DW (ed) Productivity, volume 1: postwar economic growth. The MIT Press, Cambridge, Massachusetts
Kendrick JW (1976) The formation and stocks of total capital. Columbia University Press, New York
Liu G (2011) Measuring the stock of human capital for comparative analysis: an application of the lifetime income approach to selected OECD countries. Paris. Statistics Directorate, Organisation for Economic Co-operation and Development. Statistics working paper no. 6
Mincer J (1974) Schooling, experience and earnings. Columbia University, New York
Organisation for Economic Co-operation and Development (2010) The OECD human capital project: progress report. Organisation for Economic Co-operation and Development, Paris
Rao S, Tang J, Wang W (2010) ICT capital and MFP growth, evidence from Canadian and US industries. Trans Corp Rev 2(3):59–71
Rosen S (1989) Comment on ‘The Accumulation of Human and Non-Human Capital, 1948–1984’. In: Lipsey RE, Stone Tice H (eds) The measurement of savings, investment, and wealth. University of Chicago Press, Chicago, Illinois
Schreyer P (2009) Towards measuring the volume of health and education services, draft handbook. Organisation for Economic Co-operation and Development, Paris
Schreyer P (2012) Output, outcome and quality adjustment in measuring health and education services. Rev Income Wealth 58(2):257–277
Statistics Canada and Organisation for Economic Co-operation and Development (OECD) (2005) Learning a living: first results of the adult literacy and life skills survey. Statistics Canada and OECD, Ottawa and Paris
Stiroh K (2002) Information technology and the U.S. productivity revival, what do the industry data say? Am Econ Rev 92(5):1559–1576
Triplett J (2006) Handbook on hedonic indexes and quality adjustments in price indexes: special application to information technology products. Organisation for Economic Co-operation and Development (OECD). OECD Publishing, Paris
Acknowledgments
The authors thank Isabelle Amano, Dan Boothby, John Baldwin, Winnie Chan, Gang Liu, Fabiola Riccardini, Paul Schreyer, two anonymous referees, and editor for their helpful comments. The authors are grateful to the members of the National Accounts Advisory Committee of Statistics Canada as well as to the participants in the 2010 Canadian Economics Association annual meeting and the participants in the 2010 International Association for Research in Income and Wealth conference for their feedback.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Gu, W., Wong, A. Productivity and economic output of the education sector. J Prod Anal 43, 165–182 (2015). https://doi.org/10.1007/s11123-014-0414-y
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11123-014-0414-y