Private returns versus social returns, Microeconomics

Private Returns Versus Social Returns

As there is subsidisation of education by the state in all countries (and a little higher subsidisation in developing countries) it happens that private costs will be low. Returns to an individual due to low private costs will definitely be higher than the returns as taxes on income of the individuals for the state due to relatively higher public costs. Hence private returns work out to be higher than social returns. The unit costs of primary education are quite low. But their social returns may be high. To illustrate this, let us look at this situation notionally as follows.

Treating the opportunity cost of secondary education as foregone income, let us add it to the income of primary school graduates who are in the work force and earning. Let us then aggregate the private returns of all such workers with primary education to derive the net social return for primary educated workers. Then the social returns to primary education will far exceed those to secondary and higher education. Likewise, the returns to education in developed countries have already reached their full potential and any marginal investments will not lead to substantive additional returns.

This is not true of developing countries which have a high level of illiteracy and low average level of educated population. Even marginal investments will generate knowledge and skills that lead to higher levels of productivity and income. Hence, social returns for developing countries are higher than those for developed countries (Psacharopoulos and Hinchcliffe: 1985).

Posted Date: 12/17/2012 4:51:36 AM | Location : United States







Related Discussions:- Private returns versus social returns, Assignment Help, Ask Question on Private returns versus social returns, Get Answer, Expert's Help, Private returns versus social returns Discussions

Write discussion on Private returns versus social returns
Your posts are moderated
Related Questions
How do you calculate marginal revenue, and monopolistic profit?

Demand Function is Homogeneous of Degree Zero: Mathematical Presentation  we will show that demand function is homogeneous of degree zero in prices and money income. In o

what is the Theory of second best? Prove the theorem with the help of digram

Price/Earnings (P/E) Ratio This is a measure of an organization investment potential. Literally, a P/E ratio is how much a share is worth per dollar of earnings. The price-earn

illustration for demand of big macs using indifference curve and budget line

I have 3 questions regarding the economics of potlatch, 1.) What is the economic purpose of potlatch? I don''t fully understand this question... I believe potlatch is a gift econ

The Equilibrium Consumption Combination equilibrium for the person occurs at the point where the indifference curve, shown by II, is tangent to the budget line, portrayed by BB. T

What is opportunity cost?  Answer:   Opportunity cost is a term used in economics, to mean the cost of something in terms of an opportunity foregone (and the advantages that co

In the short run, the size of the plant is fixed whereas in the long run a firm can adjust its plant size. One of the choices in the long run will be the short run plant size. That

Suppose there are two countries (home and foreign) and that two goods can be produced within those countries: machinery (M) and bread (B). Marginal product of labor (MPL) is given