Public spending on higher education in developing countries: Too much or too little?

This paper discusses problems with the prevalent view that public resources for education in developing countries should be reallocated from higher to lower levels of education. There may be a case for maintaining and even increasing spending on higher education, as long as public funds can be directed to research and other ''public good'' functions of institutions of higher education. Current measures of social returns to primary, secondary and higher education do not reflect unmeasured social benefits at each level; since we do not know the relative size of these benefits across levels, we do not know the true ranking of social returns across primary, secondary and higher education. The true social rate of return to certain components of higher education, such as research and postgraduate training in science and technology, and creation of other skills where social returns probably exceed private returns (such as public administration) is probably high, and in some settings, may now be as high or higher than the social rate of return to primary and secondary education. Moreover, achieving and sustaining adequate levels of quality to capture these social returns requires minimal stability in public financing, arguing against major reallocations away from higher education. But this does not argue for more public spending on all higher education programs. On the contrary; within the envelope of total public spending on higher education, reallocation away from public spending on undergraduate training makes sense, since such training probably has low social compared to private returns, and can be accomplished by greater reliance on private universities and by increasing tuition and other fees in public universities, while ensuring equitable access through loan and scholarship programs. Copyright (C) 1996 Elsevier Science Ltd