The relationship between public expenditure per pupil and returns to education in Peru: A cohort analysis

Abstract

Between 1960 and 2015, real public spending on education per student in Peru witnessed a significant decline at all levels until 1990, followed by a moderate recovery. Economic theory relates this expenditure to the quality of education, which can directly affect private returns to education in the labor market. The objective of this research is to find this relationship using econometric methods and household surveys. Using a cohort approach based on the methodology introduced by Deaton and Paxson (1993) and Attanasio (1993), we uncover a declining trend in returns for older generations with a modest recovery for more recent generations, especially for higher education and for female workers. Furthermore, we also discuss the importance of bolstering public spending and enhancing education quality, emphasizing the need for this dual approach.