Improving the Quality Versus Increasing the Quantity of Schooling

Abstract

Interest in estimating the impact of school quality on earnings has increased. But most studies on this topic have important limitations, particularly in studies for developing countries. They tend to ignore behavioral decisions regarding schooling and individual and family background characteristics, use school quality measures aggregated to the regional level, and rely on crude indicators of teacher quality. These limitations may explain why the micro evidence of important school quality effects is scant. Moreover, the question of the relative rates of return, in terms of earnings, to improving school quality versus raising quantity has not been addressed. The data demands for estimating such rates of return are considerable. This paper presents a conceptual framework for undertaking such estimates, uses special data collected for this study, and makes estimates within a framework that controls for important individual and household choices, including the duration of schooling and subsequent participation in the wage labor market. Subject to qualifications because such an ambitious strategy stretches the limits of the even the special data that we collected, the estimates suggest that in rural Pakistan rates of return are much higher for investing in primary school quality or quantity than for investing in middle schools and, at the primary school level, somewhat higher for expanding low-quality schools (predominantly for girls) than for increasing quality in existing schools. More generally, the methods adopted here permit a more satisfactory assessment in developing economies than previously of the rates of return to improving school quality versus increasing quantity and their implications for educational policy.