Input-output models are used in economics of education in studies of cost-quality and education-labour-earnings relationships. Different levels and forms of education have different time spans, costs, resource needs and gestation periods for employment. They also lead to different types of employment opportunities for similar educational programmes and for different types of education. Levels and forms of education with comparable inputs may lead to different earning streams. For example, a matriculate, an intermediate, a diploma holder of three years from polytechnic in any engineering discipline, one with 3 years industrial training, and a general graduate would each be served with diverse job opportunities and life-time earnings. Which courses lead to which types of job and how much life-time earnings, reflects the efficiency and economic value of educational courses.
Quality of outputs of education is determined partly by the quality of inputs. In a sense, it is in keeping with the English proverb: “as you sow, so you reap”. Quality has a cost. Similar inputs of different quality have differing costs. For instance, an elementary school teacher has to be paid differently if the qualifications/quality of the teacher differs. A 12 + diploma holder with teacher training differs from a graduate or a post-graduate with teacher training who opts to teach at elementary level. While government/State supported schools recruit 12+ graduates (with teacher training), the self-financing urban (private unaided) schools recruit post-graduates to teach at the elementary level. Quality of work and quality of output thus varies with the costs. How to raise quality while minimising or rather optimising cost of education is an important area of work in input-output analysis.
There have been a number of studies in education which have used ‘Systems Analysis’ approach for examining the relationships between input-output variables and the way the inputs get processed as outputs and emerge as outcomes. Some of these works are cited under ‘some useful books’ at the end. The systems approach to education is criticised by Kenneth Arrow, a Nobel Laureate well known for his theory of social choice. Famous for his “Screening Hypothesis”, Arrow asserted that education acts as a ‘signal’ or a ‘filter’ and does not lead to earnings. A person’s opportunities for employment and earnings get influenced by the person’s gender, contacts, experience, intelligence and competence, emotional maturity, language proficiency, rural-urban background, etc. Thus, qualifications can be only one of the variables. This criticism is applicable both to input-output studies as well as cost-benefit studies.