Economic Consequences of Educational Backwardness in Twentieth-Century Brazil

Abstract

This paper evaluates the economic impact of alternative policies for investing in public education in Brazil between 1933 and 1985. It tests the hypothesis that increased spending on schooling beginning in the 1930s would have had an appreciable positive impact on the level of GDP per capita. We assess the economic effects of higher levels of educational attainment by taking into account two distinct channels: a demographic channel in which schooling reduces fertility rates, and a production channel by which schooling raises productivity per worker. We quantify these effects by specifying counterfactual scenarios with higher public spending on education and measuring the economic impact of the increase in educational attainment in a simple growth model. Raising outlays on public primary education by one percent of GDP each year increased the counterfactual estimate of GDP per capita by as much as 26 percent over its observed level in 1985 and reduced the estimated size of the population by 14 percent. Raising educational outlays by two percent of GDP increased per capita output by almost 32 percent and reduced counterfactual population by 19 percent. These results are consistent with our hypothesis and suggest that low levels of spending on primary education in the twentieth century were costly to Brazil.