Financing Financing Lifelong Lifelong LearningLearning

Harry Anthony PatrinosHarry Anthony PatrinosWorld BankWorld Bank

Knowledge economy puts premium on learningRequires multi-sector strategyFocus on equity

Learning in the Knowledge Economy

Focus on equityExpand access to learningRaise quality by changing incentivesVariety of financing mechanisms

Learning in the Knowledge Economy

ThenInformation basedRote learning

NowKnowledge creation/applicationAnalysis and synthesis

Just in case Terminal education

Just in timeLifelong learning

Learning in the Knowledge Economy

ThenInformation basedRote learning

NowKnowledge creation/applicationAnalysis and synthesis

Just in case Terminal education

Just in timeLifelong learning

Learning in the Knowledge Economy

ThenInformation basedRote learningTeacher directed

NowKnowledge creation/applicationAnalysis and synthesisCollaborative learningTeacher directed

Just in case Formal education onlyDirective based Learn at a given ageTerminal education

Collaborative learningJust in timeVariety of learning modes Initiative basedIncentives, motivation to learnLifelong learning

Financing Learning

• Spending increases, public resources limited• Priority for public: basic education• Balance between subsidies and market• Balance between subsidies and market

– Benefits both private and public– Access to capital uneven

Variety of Finance Mechanisms

Cost-recovery SubsidiesTraditional loan Voucher

Human capital contracts Conditional cash transfersHuman capital contracts Conditional cash transfers

Graduate tax Financial incentives

Income contingent loans Scholarships/Learning accounts/levies/tax

Examples of Finance MechanismsCost Recovery Examples

Traditional Loan Mexico, USA

Human Capital Contracts Colombia, Germany

Income Contingent loans

Australia’s Higher Education Contribution Scheme (HECS)Yale’s Tuition Postponement Option PlanChile’s University Credit Solidarity New Zealand, Ghana, Sweden, UK

Examples of Finance MechanismsType of Subsidies Examples

Vouchers Chile, Guatemala, Holland, Sweden

Financial incentives Canada, Netherlands

Conditional cash transfers Mexico, USA

• Traditional loan (mortgage-type): None

• Income contingent loan: No experimental evidence

Evidence

evidence

• Graduate tax: None, but some suggests debt aversion

• Human capital contract: None yet

Evidence• Financial incentives: Evidence from Holland on piece

rates indicate high ability students benefit, low ability students harmed

• Scholarships/grants: USA evidence indicates $1000 change in price changes enrollment by 6 percentage points

• Vouchers/entitlements/learning accounts: Quasi-experimental evidence shows that GI Bill increased educational attainment

• Tax deductions: Dutch evidence shows that age dependent deduction for firms let to training postponement (rather than increase); substantial effects for worker subsidies

Evidence on Finance Mechanisms

• Limited rigorous evidence on impact

• Amount of evidence varies by type

• More and better evaluations required• More and better evaluations required

• Best evaluations involve random assignment

Debt Aversion

• Recent studies find debt aversion: elite USA universities and among Latin American students

• Disutility of carrying debt over & above effects of debt on lifetime consumption patternson lifetime consumption patterns

• If such students debt averse, very likely students from poorer social backgrounds are also debt averse

• Presence of debt aversion restricts potential for loans, mortgage-type especially

Summary and Conclusions

• Still limited practical experience• Debt aversion• Financial incentives: positive results, but equity

issues• More information on marginal benefits needed• Need randomized studies