Developing a Sustainable Economy in Cameroon

11 - Economic Analysis of Private Returns to Investment in Education in Cameroon

11 Economic Analysis of Private Returns to Investment in Education in Cameroon Aloysius Ajab Amin and Wilfred J. Awung Introduction Newly independent African governments in the 1960s and later invested heavily in education with the conviction that this would generate rapid economic growth. In fact, education with investment in human capital was expected to contribute to growth by improving the productivity of the labour force, reduce income inequality and poverty. The human capital model (Becker 1993), the endogenous growth models (Lucas 1988) and the application of augmented Solow model Mankiw, Romer and Weil 1992) have stressed the important role of education with human capital in economic growth. Thus, the budget allocation for education became the largest category of state expenditure. Private returns to investment in education tended to be higher than investments in other sectors of the economy, as the labour force acquired more education and skills (Glewwe 1999). Education, therefore, triggers regional mobility of labour. People with higher education move from lower-paid jobs to higher-paid ones as their productivity increases. According to a recent study, farmers who are educated produce on average eight times more output than their non-educated counterpart (World Bank 1992). But education’s contribution to growth can only be significantly important where graduates are gainfully employed. With the decline in most Africa economies and the changing labour market conditions in many African countries, the many graduates left unemployed calls into question the wisdom and nature of such investments in education. Investment in education is evaluated in terms of returns to investment. The rate of return can be estimated as the discount rate that equates the present value of economic costs and the benefits of an investment. Private rate of return to education is calculated using after-tax earnings differentials and only those educational costs actually borne by the student or their family. Social rates of return are based on before-tax earnings differentials or total earnings and the total resources the society incurred on education. The human capital model of Beaker (1974) and Mincer 220 Developing a Sustainable Economy in Cameroon (1975) has been the method used for such evaluation. The Mincerian earning functions have been well applied on individual countries’ data, with the semi- logarithm specification being very robust in empirical studies. But controversies exist as to the nature of investments in education in developing countries. Earlier studies reveal that returns to investments in education are positive and decrease the higher the level of education, and as such investments in primary education should be emphasized at the expense of higher education (Psacharopoulos 1994). Recent studies have produced results to the contrary. These reveal that returns to investments in education increase the higher the level of education (Manda and Bigsten 1998; Liu 1998). This is important, as it may underscore the role of education at all levels in the development process. The aim of this chapter is to evaluate private returns to investment in the different levels of education given the changing labour market conditions in Cameroon. According to Psacharopoulos (1994), private returns to investments in education are an important factor in determining educational attainment, participation and ultimately wages/income. Education is critical in income distribution and economic development. This has led many countries including Cameroon to prioritize public spending on education. The Cameroon Education System Education in Cameroon is based on the British and French educational systems. As such, there are two educational systems in the country. In the French-speaking regions or areas, the French system of education dominates, while in the English-speaking regions or areas, the English pattern of education prevails. The colonial background and the diversity of Cameroonian society make the Cameroonian educational system unique in Africa. The dual structure of education creates structural constraints that have made the development of education complicated. For instance, primary education is six years in the Francophone system, while in the Anglophone system it is seven years. Secondary education is four years in the Francophone, while it is five years in the Anglophone system. However, at high school, before entry into university, it is three years for the Francophone and two years for the Anglophone student. In Cameroon, education is provided by both public and private sectors. The private sector includes religious and private lay institutions, which are usually supported by the government through subvention. Currently, the aims of education in Cameroon are to: i) rapidly eliminate regional disparities in terms of educational achievement through increase in equipment, teaching material and teaching...