The Social Returns to Increased Investment in Education

Measuring the Effect of Education on the Cost of Social Programs

by Richard Krop

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This research estimates the relationship between educational attainment and the use of a wide range of public programs, including welfare, SSI, Food Stamps, unemployment benefits, Social Security, Medicare, and Medicaid. The effect of educational attainment on incarceration rates also is estimated, as is its effect on state and federal tax revenues. A cohort population model is used to estimate the additional amount of schooling required to eliminate the gap between the educational attainment of whites and that of blacks and Hispanics. The net effect of the elimination of this gap on the cost of government programs and tax revenues is then estimated. The reduction in government spending and the increase in revenues is 2 to 3 times the cost of the additional education. If the effect of education on private income is included, the benefits of the additional education are almost 5 times its costs.

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