Measurement of Returns To School
Measurement of returns to school (r) is measured by: Y*= wages of illiterate people Y= wages of people after education C= cost of education
r= (Y - Y*)/(Y* + C)
Where Y - Y* is benefit.
Now this is only for 1 year
so,
Y - Y*/(Y* + C)x
Where x is the number of years.
For developed countries Y* is higher than the developing countries. But the leap from Y* to Y is greater in developing countries. Therefore in developing countries the rate of returns to school is much much higher. In developing countries the rate of return of investing on human capital is much higher.
There is a difference between the rate of returns for boys and girls. The returns is very less in comparison to boys. The rate of return for boys is much greater.
This mathematical formula was given by Psacharopoulos. He was a Greek economist.
Read more about this topic: Socio-economic Issues In India, Education
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