This section compares the social return to schooling (using the baseline and min estimates) with the returns to non-infrastructure physical capital and to infrastructures (rk and rx). The two rates of return are calculated as ri = MPi - δi + g, where MPi is the marginal product of factor i, δi its rate of depreciation and g the rate of technical progress (which is assumed to be 1.5% as in the previous sections). The marginal products are calculated using the estimates of the production function in equation (2).
The main difficulty when assessing the marginal products to non-infrastructure physical capital and to infrastructures is that estimating (2) using the CRENOS infrastructure series yields different results than using the Bonaglia and Picci (2000) infrastructure series. In particular, the Bonaglia and Picci (2000) infrastructure series yields statistically significant effects of infrastructures on productivity but insignificant effects of non- infrastructure capital, while the CRENOS series produces the opposite results. To identify upper bounds on the social return to non-infrastructure capita and infrastructure, we will rely on the Bonaglia and Picci (2000) infrastructure series for the social return to infrastructure and on the CRENOS series for the social return to non-infrastructure capital.
With the Bonaglia and Picci (2000) infrastructure series and the CRENOS non- infrastructure physical capital series we find that average returns to infrastructures are larger in the North than in the South. We also find that in the South the social return to schooling exceeds that to infrastructure by more than 5% even under the most conservative (min) scenario. In the North and the Center the social return to infrastructures exceeds that to schooling.
Using the CRENOS infrastructure and non-infrastructure physical capital series yields an average return to non-infrastructures physical capital in Italy of 4.7%. Hence, the social return to schooling exceeds the social return to non-infrastructures physical capital even under the most conservative (min) scenario. We also find that the social return to schooling exceeds that to non-infrastructure physical capital by more than 4% in the South.
6. Summary
We have estimated the private (individual) and social return to schooling in Italy as a whole and four macro regions. While our contribution is centered on this (rather complex) task of measurement and estimation, there are some conclusions that seem worthwhile emphasizing (and exploring further) at this point:
1. The private (individual) return to schooling in Italy increases by around 50% when the calculation accounts for schooling reducing unemployment spells (which given Italy’s low replacement rates lead to substantial income losses) in addition to increasing wages. This continues to be the case when we control for the endogeneity of individual schooling.
2. There is no evidence that the private return to schooling is lower in the South than in the North of Italy.
3. Estimates of the private return to schooling compare favorably to the return to financial assets (especially in poorer regions) suggesting that financial incentives to invest in schooling are adequate.
4. While the (mostly) public provision of schooling in Italy raises the private return to schooling, this effect is more than offset by the progressivity of the income tax. Our calculations suggest that the private return to schooling in Italy would rise if tuition reflected the social cost of schooling and taxes were proportional to income.
5. At the social level, the return to schooling exceeds the return to infrastructures for poorer regions.
Appendix10
A1. Expenditures on secondary and university education in 2000
Private and public expenditures per student in formal education at the upper secondary and university level can be estimated using data from different publications of the Ministry of Education, University and Research (MIUR) and the National Statistical Institute (ISTAT) (details on the data sources and the calculations can be found in Table A2). Secondary schooling includes general academic programs as well as programs that combine general academic and a more vocational education. Public expenditures are the sum of operating costs of public educational institutions (net of research expenditures by universities), indirect costs (general administration and support programs) and two types of subsidies to households: tuition waivers at the university level and subsidies to cover living expenses and other costs at the university level. Private expenditures are defined as tuition fees paid by households plus expenditures on books and school materials minus non-tuition subsidies received by them. Total expenditures are calculated as the sum of public and private expenditures.
Table A1 shows expenditures per student at the upper secondary and university level for the year 2000, combining students enrolled in private and public centers. These figures are relative to average expenditures per student in the entire country. Following de la Fuente, Doménech, and Jimeno (2003), the last three columns (under the heading Combined) approximate the cost per student of an increase in upper secondary attainment under the assumption that half of those graduating from upper secondary school will go on to university (they are weighted averages of expenditures per student at the upper secondary and university level with weights of 2/3 and 1/3 respectively). The last row of the table contains average expenditures for the whole of Italy in Euros.
Table A1 AVERAGE EXPENDITURES PER STUDENT, 2000
(WEIGHTED AVERAGE OF ALL REGIONS, ITALY= 100) Upper secondary University Combined private Public total Private public total private public total
North West 111 103 104 166 112 122 141 106 110 North East 89 108 107 104 104 104 97 107 106 Center 86 103 102 91 106 103 89 104 102 South 118 94 96 83 88 87 99 92 93 Objective 1 99 95 95 63 90 85 79 93 92 Average, Euros 388 4999 5387 929 4408 5338 568 4802 5370
Table A2 SOURCES USED TO ESTIMATE EDUCATIONAL EXPENDITURES PER
STUDENT BY REGION
Total public expenditures on secondary school for the year 1999 are taken from Ministry of Education, University and Research (MIUR) 2001, Indicatori della spesa pubblica per
l’istruzione scolastica. Anno finanziario 1999 (www.miur.it). The estimate for the year
2000 is obtained by applying the increase in aggregate education expenditures between 1999 and 2000 in MIUR 2002, Spesa pubblica per l’istruzione, anni 1991-2000 to the 1999 figure. Regional expenditures are estimated based on the number of teachers at the regional level available in MIUR 2003, Alunni, classi, docenti. Dalla scuola materna
alle scuole superiori in Italia, 1996-2003.
Sub-regional expenditures on secondary school for the year 2000 are taken from MIUR 2002, La spesa per l’istruzione delle province e dei comuni, anno finanziario 2000. The number of enrolled secondary school students is taken from MIUR 2003, Department of
Statistics, Alunni iscritti alle scuole secondarie superiori per regione, anni 1999-2000 e
2000-2001.
Total public expenditures on universities are calculations made by the National Committee for the Evaluation of the University System (www.cnvsu.it) based on data from MIUR 2003, Department of Statistics, Indagine sull'istruzione universitaria anno 2000 e 2001. R&D expenditures are taken from Italian Institute of Statistics (ISTAT) 2003, Lo stato
dell’Università. I principali indicatori. Anno accademico 1999-2000 (www.istat.it).
Private secondary school expenditures (private secondary school, books etc.) are estimates based on ISTAT 2003, Indagine sui consumi delle famiglie, Anno 2000.
Private university expenditures (university fees paid at private and public universities, etc.) are taken from three different sources. Fees paid to public universities are taken from MIUR 2003, Department of Statistics, Indagine sull'istruzione universitaria anno 2000
e 2001. Fees paid to private universities are taken from MIUR 2003, Department of
Statistics, La contribuzione studentesca e delle altre entrate da parte degli studenti.
Rilevazione 2000. Other expenditures (books etc.) are estimated based on ISTAT 2003, Indagine sui consumi delle famiglie, Anno 2000.
Enrolled university students are taken from MIUR 2003, Department of Statistics, Studenti
iscritti per Ateneo. Valori assoluti, anni 1999-2000 e 2000-2001.
Living subsidies for university students are taken from ISTAT 2003, Lo stato
Public upper secondary school expenditures
The starting point is total public spending on upper secondary education in Italy in 2000 less public spending on upper secondary education by sub-regional administrations (comuni and provincie). These expenditures are distributed across regions in proportion to the number of secondary school teachers in each region. These regional expenditures plus upper secondary education expenditures by sub-regional administrations are equal to public secondary school expenditures at the regional level. Note that this procedure treats total public spending by regional governments like public spending by the national government. While it would have been preferable to differentiate between the two types of expenditures, this is not feasible as reliable information of public upper secondary school expenditures by regional governments seems to be unavailable. The resulting inaccuracy is likely to be very small however as public spending by regional governments amounted to only 2.3% of total public spending in 1999, the latest year for which information is available (MIUR 2001,
Indicatori della spesa pubblica per l’istruzione scolastica. Anno finanziario 1999). Private upper secondary school expenditures
Private expenditures on upper secondary school consist of expenditures on books and other school materials and tuition fees of students at private upper secondary schools. These are estimates using ISTAT 2003, Indagine sui consumi delle famiglie, Anno 2000.
Public expenditures on university education
The starting point is expenditures at the university level obtained from balance sheet data for the year 2000. These figures are aggregated to the regional level. Subtracting university R&D expenditures at the regional level and adding scholarships and non-tuition subsidies from public sources other than universities (housing and food subsidies) yields public expenditures on university education.
Private expenditures on university education
Private expenditures on university education consist of expenditures on books and other university materials and tuition fees of students at private and public universities. The starting point is income from tuition fees obtained at the university level from balance sheet data of all public universities in 2000. To these we add an estimate of fees paid to private
Universities (in this case the latest available year for which information is available is 1999). These figures are aggregate to the regional level and combined with estimates of expenditures of books and other university material obtained using ISTAT 2003, Indagine
sui consumi delle famiglie, Anno 2000. The final figure is obtained by subtraction non-
tuition subsidies from public sources other than universities (housing and food subsidies)
A2. Data used to calculate the private return to upper secondary school attainment and university attainment
Table A3 TAX AND SOCIAL SECURITY DATA USED TO CALCULATE THE PRIVATE RETURN TO UPPER SECONDARY SCHOOL AND UNIVERSITY ATTAINMENT
Upper Secondary University
T'
τ
0 T'τ
0 North West 33.40% 29.03% 42.69% 30.85% North East 33.50% 31.18% 42.69% 32.35% Center 33.50% 30.80% 42.69% 32.27% South 33.50% 30.54% 42.69% 31.79% Objective 1 33.50% 30.33% 42.69% 31.62% Italy 33.5% 29.22% 42.69% 30.75%Table A4 DATA USED IN THE CALCULATION OF THE PRIVATE RATE OF RETURN TO
UPPER SECONDARY SCHOOL ATTAINMENT
µs µ po ps η ε North West 2.2% 28.8% 94.6% 68.7% 72.58% 1.03% North East 1.6% 26.5% 96.0% 84.4% 87.90% 0.57% Center 1.5% 25.2% 92.1% 58.5% 63.58% 1.32% South 2.3% 26.5% 77.9% 32.8% 42.08% 3.44% Objective 1 2.0% 26.1% 76.6% 30.3% 39.62% 3.53% Italy 1.9% 26.0% 89.50% 58.47% 65.33% 2.09% Table A5 DATA USED IN THE CALCULATION OF THE PRIVATE RATE OF RETURN TO
UNIVERSITY ATTAINMENT µs µ po ps η ε North West 6.6% 27.5% 97.6% 76.0% 77.83% 0.52% North East 3.9% 22.4% 97.7% 84.3% 86.22% -0.01% Center 3.3% 21.2% 95.6% 67.4% 70.53% 0.93% South 3.3% 19.8% 88.1% 54.4% 61.77% 3.64% Objective 1 2.5% 19.4% 87.1% 53.0% 60.78% 3.92% Italy 3.8% 21.7% 95.00% 70.46% 74.17% 1.48%
A3. Average full-time earnings by regions and educational attainment
Calculations of average full-time earnings by regions and educational attainment are based on SHIW net earnings data. Gross earnings are obtained using the lower bounds of the Brandolini and Cipollone (2003) adjustment factors.11
Table A6 AVERAGE FULL-TIME EARNINGS BY REGIONS AND EDUCATIONAL
ATTAINMENT IN 2000. EUROS. All Levels Upper
Secondary University North West 24111 23548 26766 North East 24331 24760 28392 Center 24563 26030 31004 South 23260 23377 26987 Objective 1 23365 23400 27024 Italy 24224 24622 28229
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