By Educacion gyditeji008 no-•R6pR 15, 2011 SI pagos Public Disclosure Authorized WPS4517 P olicy R eseaRch W oRking P aPeR 4517 Accessibility and Affordability of Tertiary Education in Brazil, Colombia, Mexico and peru within a Global Context to View nut*ge Yuki Murakami Andreas Blom The World Bank Latin PACE 1 or61 Development Sector bra Policy ReseaRch Wo Abstract Region Human This paper examines the financing of tertiary education in Brazil, Colombia, Mexico and Peru, comparing the affordabiliry and accessibility of tertiary education with that in high-income countries.
To measure affordability, the authors estimate ducation costs, living costs, grants, and loans. Further, they compute the participation rate, attainment rate, and socio- economic equity index in education and the gender equity index as indicators of accessibility_ This is the first study attempting to estimate affordability of tertiary education in Latin America within a global context. The analysis combines information from household surveys, expenditure surveys, and administrative and institutional databases.
The findings show that families in Latin America have to pay 60 percent of per-capita income for tertiary marginal role in improving affordability. Moreover, the paper confirms previous findings of Iow access to tertiary education in the region. One policy implication of the findings is that Latin American governments could take steps to make tertiary education more affordable through student assistance.
This paper—a product of the Education Sector Unit in the Human Development Sector at the Latin America and Caribbean Region —is part of a larger effort in the department to is part of a larger effort in the region to provide analysis and policy options for education reform. Policy Research Working Papers are also posted on the Web at httpWecon. worldbank. rg. The author may be contacted at ablom@worldbank. org. The policy Research Working paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues.
An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those ofthe Executive Directors of the World Bank or the governments they represent.
Produced by the Research Support Team Accessibiliry and Affordability of Tertiary Education in Brazil, Colombia, Mexico and Peru within a Global Contextl 2 world Bank 1818 H Street washington D. C. 20433 U. S. 2 OF Contextl Yukl Murakami Andreas Blom World Bank 1818 H Street washington D. C. 20433 U. S. A. We thank Alex Usher, Jamil Salmi, Daniel Cotlear, Jose•Joaquin Brunner, Eduardo Velez Bustillo, Alberto Rodriguez, Augusto de la Torre, and participants at the Pan-American Student Loan Conference in Lima, Peru, March 2007 for comments and suggestions. 2 Email addresses: ymurakami@worldbank. rg and ablom@worldbank. org This Working Paper disseminates the flndlngs of work in progress to encourage the exchange of ideas about development issues. An objective of the paper is to get authors. They do not necessarily represent the View of the World Bank, its Executives Directors, or the countries they represent. 1 INTRODUCTION This paper analyzes the affordability and accessibility of tertiary education in four selected Latin American countries (grazil, Colombia, Mexico and Peru) within n international context. In the past two decades, countries in Latin America and the Caribbean (LAC) liberalized their economy.
Together with technological advances and increased globalization, this policy has increased demand for knowledge and workers with tertiary education (Attanasio and Szekely, 2000; Sanchez-paramo and Schady, 2003; De Ferranti et al, 2003; Goldberg and Pavcnik, 2005). LAC governments also have increased investments in education in the last two decades. These investments sou governments alsa have increased investments in education in the last two decades. These investments sought to increase attainment of education and in particular for children of Iow- income families.
As a result, graduation rates of primary and secondary education improved remarkably. This increased the pool of qualified students for tertiary education. Hence, the demand for tertiary education intensified. As a consequence, the rate of enrollment in tertiary education in LAC has increased annually by 2 percent since 1 985 (Holm-Nielsen et al, 2005). In LAC countries, such as Argentina, Chile, Colombia and Mexico, public and non-governmental universities expanded and iversified to absorb some of the increased pool of qualified students from secondary• education.
However, LAC countries continue to trail high-income countries in terms of enrollment. In 2001, the tertiary education enrollment rate in high-income countries was about 56 percent compared to 23 percent for LAC countries (World Banki 2002). What triggers a comparatively Iow enrollment rate in LAC? The main factors seem to be: (i) affordability and lack of financing of tertiary education, (ii) insuficient and unequal access to secondary education, (iii) the lack of information, and (iv) Iow expectations of attending tertiary ducation among youth from Iow-income families.
Based on surveys of families in Colombia and Mexico, affordability and lack of financing seem to be the main obstacles for families (ICETEX, 2006; Suzuki, Biom, and yamrnal,2006; UNESCO, 2006; world Bank, 2005). Surprisingly, we hardly know haw affordable tertiary education is in Latin America compar Surprisingly, we hardly know how affordable tertiary education is in Latin America compared within a regional and global context. We know that Latin American countries differ in their policies on tertiary education finance. Some have tuition in public nstitutions, others not.
Some promote non-governmental tertiary education with full tuition, others frown of non-governmental education. Some run large student assistance programs, others administer smaller programs. However, we do not know how these differences affect affordability and access for the students. Often, discussion of financing of tertiary education is limited to an ideologically driven debate for or against tuition in public universities. Nevertheless, financing of tertiary education is more than a dlscussion of the tuition level of public tertlary education. One needs to analyze a comprehensive set of factors when analyzing tertiary education finance.
Our goal ofthis study is to estimate affordability and accessibility of tertiary education in selected Latin American countries. This seeks to provide more objective information for policymakers. Aso, the analysis enables us to better understand the impact of student assistance policies for increased enrollment. Especially, this paper seeks to answer the following research questions: What are the costs of tertiary education to Latin American families? How important are living costs for tertiary education? Is financial aid improving affordability of tertiary education at the national level? This is the first attempt to compare affordability of tertiary education across Latin American countries. A se s OF compare affordability oftertiary education across Latin American countries. A series of studies looks at how much governments and countries invest in tertiary education (UNESCO and OECD, 2002; Holm-Nielsen et al, 2005; UNESCO, 2006, among others). Very few Studies examine the costs for the individual countries (ICHEFAP, 2007; World Bank, 2003). None ofthese compare costs internationally. We take into account not only the direct costs of education such as tuition, fees and other costs, but also financial aid to students.
Further, we compare across countries. This report follows the methodology of Usher and Cervenan (2005) «Global Higher Education Rankings: Affordability and Accessibility in Comparative Perspective». This enables an international comparison of Our findings for Latin American countries. 4 To measure affordability of tertiary education, we estimate education costs (tuition and other fees), living costs, grants, and loans. These elements are incorporated into four ifferent affordability indicators: education costs, total costs, net costs, and out-of-pocket costs.
To measure accessibility of tertiary education, we compute four indicators: participation rates, educational attainment, educational equality index and gender parity. For the analysis, we chose Brazil, Colombia, Mexico and peru. These countries seem well suited for an analysls given that: (i) they represent 66 percent of the region’s population, (ii) these countries represent relatively different approaches to financing tertiary education, and (iii) information and data could e collected to a minimally acceptable degree. Further, the World Bank has on-goi 6 OF and data could be collected to a minimally acceptable degree.
Further, the World Bank has on-gong policy dialogue with these countries within tertiary education. We realize a broader selection of countries would enrich the study and make it more representative of the entire region, but it was not possible with the available information and budget. Unfortunately, we have had to rely on different sources of data, in particular for tuition costs. We are comparing tuition information from administrative data, ousehold survey The paper does not rigorously evaluate the impact of student financlal aid for the indlvidual student.
Other studies have done so: (ICETEX, 2006) and (canton and Biorn, 2004) 4 High-income countries included are Australia, Austria, Belgium, Canada, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Sweden, the United Kingdom and the United States. Due to the limited availability of data on access to tertiary education, Japan and New Zealand are measured for affordability only. data, and the institutional websites. As such, we recognize the riticism of comparing apple with oranges, and recommends that the findings be treated as indicative.
Higher comparability of data is required to reach more reliable results. We find that: (i) the direct cost of tertlary education considerably higher in Latin America, 35 percent of GDP per capita, than in high-income countries, 10 percent- Therefore, tertiary education seems less affordable, (ii) the cost of living for accommodation and food is a significant share of costs o cation, 29 percent in Latin America com accommodation and food is a significant share of costs oftertiary ducation, 29 percent in Latin America compared to 19 percent in high-income countries, (iii) there is a Iow level of grants and loans in Latin America.
On average, student assistance Iowers the costs of tertiary education by only four percent of GDP as compared to 11 percent in high-income countries, and (iv) we confirm the finding of previous studies showing a Iow level of access to tertiary education as compared to high-income countries. The paper is divided into four sections and an annex. Section two describes the methodology and data for measuring affordability and accessibility for each country. Section three presents results and findings of the analyses, and section four discusses policy implications.
The annex contalns more information on data sources and tables with detailed information. 2. METHODOLOGY and DATA 2. 1. Methodology for Analysis This section describes the methodology developed by Usher and Cervenan, 2005, to estimate affordability and accessibility of tertiary education. 5 2. 1. 1 . Affordability We express the estimated costs of attending tertiary education as a function of ability to pay. This study uses GDP per capita at purchasing power panty of each country to xpress ability to pay 6 .
We measure the costs of attending tertiary education by four indicators of affordabillty. We only take into account direct costs not indirect costs, such as opportunity costs. The four indicators are the combinations of five cost components: education costs, living costs, grants, student loans, and tax breaks. They are defined below (Table 1). costs, grants, student loans, and tax breaks. They are defined below (Table 1). An important caveat in all cross-country comparison on tertiary education is the lack of information regarding quality and relevance of tertiary education.
These factors are of course important to judge both affordability and access (Hanushek, 2006). As with other cross-country studies, we do not have a reliable indicator of quality or relevance. Therefore, the proposed methodology does not take these important dimensions into consideration. 6 Ideally, ability to pay would refer to the amount of after-tax income per household, which can be used for consumption. However, this information is not available due in part to discrepancies both in the definition of household and in the reporting of after tax or disposable income. Table 1 .
Affordability Indicators Indicator (per GDP/capita) Formulas Education costs Education Costs Total costs (Education Costs) + Living Costs Net costs (Education CostS+ iving Costs – Grants) — Tax Breaks Out-of-pocket costs (Education Costs + Living Costs – Grants – Tax Breaks) – Loans Education costs. Education cost includes not only tuition, but also any additional mandatory fees, payments for textbooks and other study materials, such as reading sets. It excludes one time fees such as academic record fee or registration fee. The education cost per student is calculated separately for the public and the ongovernmental sector.
These two cost estimates are weighted according to the share of student population represented by the public and the non-governmental sectors. Living Costs. Living costs encomp represented by the public and the non-governmental sectors. Living Costs. Living costs encompass the cost of a living space and food. Although the form of living varies from one country to another, students tend to live in dormitories, apartments, houses and, above all, parents’ house. Usher and Cervenan, 2005 assumes all students live independently. However, this poorly reflects reality in Latin America.
A study on tertiary education in Argentina revealed 80 percent of tertiary education students live with at least one parent (Rozada and Menendez, 2002). We therefore estimate a reasonable cost of housing in the following way. The household surveys include data on household expenditure at the national level including information on the monthly rent. If students live at their parents’ house, they do not actually pay for the rent. However, it is a cost for parents, which is considered a living cost_ We estimate the living cost by computing the familys monthly rent divided by the number of occupants.
We alculate the rent for two semesters (approximately nine months), because we are only interested in the cost during the academic year. 7 We do not include the families who own a house or who do not pay a rent. This method is applied for the cases of Brazil, Colombia and Mexica. For Peru, the household survey explicitly collects information regarding the costs of accommodation. To estimate the Price of food consumption, we rely on the information available in the expenditure part of the national household survey. his was only available for Brazil, and not for Colombia, Mexico and Peru. For these countries, we approximate the c
