These are huge differences with major implications for the macroeconomic effects

of different education policies. Moreover, expanding access to higher education

may have significant indirect positive effects on less-educated workers, as my

analysis found. Other research suggests that these spillovers are particularly

large for postsecondary education because it is not easy to replace

college-educated workers with other types of workers.

 

Put differently, the high returns to postsecondary education in a country like

India point to a substantial unmet demand for highly skilled labor. Meeting this

demand may be the key to both enhancing economic growth and reducing inequality.

 

Of course, this does not necessarily imply that developing economies should

redirect their resources toward expanding access to higher education. There are

important trade-offs. Higher education is generally more expensive per student,

and highly skilled workers are more likely to emigrate after completing their

studies. The general point is that in shaping education policy, authorities

should pay close attention to the dramatic differences in the returns to

different levels of schooling and to the projected evolution of labor demand.

 

Quality versus quantity

 

Another debate focuses on whether to continue expanding access to education or

to concentrate on improving the quality of education. Internationally comparable

test scores show particularly low education quality in developing economies.