Economic Evaluation in Education

Economic Evaluation in Education
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The past decade has seen increased attention to cost-effectiveness and benefit-cost analysis in education as administrators are being asked to accomplish more with the same or even fewer resources, philanthropists are keen to calculate their “return on investment” in social programs, and the general public is increasingly scrutinizing how resources are allocated to schools and colleges. Economic Evaluation in Education: Cost-Effectiveness and Benefit-Cost Analysis (titled Cost-Effectiveness Analysis: Methods and Applications in its previous editions) is the only full-length book to provide readers with the step-by-step methods they need to plan and implement a benefit-cost analysis in education. Authors Henry M. Levin, Patrick J. McEwan, Clive Belfield, Alyshia Brooks Bowden, and Robert Shand examine a range of issues, including how to identify, measure, and distribute costs; how to measure effectiveness, utility, and benefits; and how to incorporate cost evaluations into the decision-making process. The updates to the Third Edition reflect the considerable methodological development in the evaluation literature, and the greater empiricism practiced by education researchers, to help readers learn to apply more advanced methods to their own analyses.

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Henry M. Levin. Economic Evaluation in Education

Economic Evaluation in Education

Economic Evaluation in Education

Brief Contents

Detailed Contents

List of Tables, Figures, and Examples. Tables

Figures

Boxes

Preface

Acknowledgments to the Second Edition

Acknowledgments to the Third Edition

Acknowledgments from Henry M. Levin

From A. Brooks Bowden

From Robert Shand

About the Authors

1 Introduction to Economic Evaluation. Objectives

1.1. Purpose and Goals of the Book

1.2. The Importance of Economic Evaluations

1.3. Economic Evaluation for Decisionmaking in Education

1.3.1. Cost Analysis

1.3.2. Cost-Effectiveness Analysis

Costs, Effects, and Cost-Effectiveness Ratios for Primary School Investments

1.3.3. Cost-Utility Analysis

1.3.4. Benefit-Cost Analysis

Costs, Benefits, and Benefit-Cost Analysis of a Dropout Prevention Strategy

1.4. Summary of Approaches to Economic Evaluation

1.5. Economic Evaluations and Policymaking

1.6. Outline of the Book

Discussion Questions

2 Establishing an Analytic Framework. Objectives

2.1. Identifying the Problem

2.2. Taking Account of the Audience and Perspective

2.3. Relating Economic Evaluation to the Theory of Change

2.4. Determining if Economic Evaluation Is Necessary

2.5. Conclusions

Discussion Questions

Exercises

3 Cost Concepts. Objectives

3.1. The Concept of Costs

3.2. Cost Per Unit

3.3. Costs and the Theory of Change

3.4. Costs Data and Budgetary Information

3.5. Motivation for Cost Analysis

3.6. Conclusions

Discussion Questions

Exercises

4 The Ingredients Method. Objectives

4.1. Identifying Ingredients

4.2. Specifying Ingredients

4.2.1. Personnel

4.2.2. Training

4.2.3. Facilities

4.2.4. Equipment and Materials

4.2.5. Other Program Inputs

4.2.6. Required Client Inputs

4.3. Sources of Ingredients Information

4.4. Conclusions

Discussion Questions

Exercises

5 Placing Values on Ingredients. Objectives

5.1. Methods for Valuing Ingredients

5.1.1. Site-Specific and Expected Prices

5.1.2. Adjusting National Prices for Geographic Location

5.2. Placing Dollar Values on Ingredients

5.2.1. Personnel

5.2.2. Training

5.2.3. Facilities

5.2.4. Equipment

5.2.5. Supplies

5.2.6. Required Client Inputs

5.3. Costs Over Multiple Years

5.3.1. Adjusting Costs for Inflation

5.3.2. Discounting Costs

5.3.3. Choosing a Discount Rate

5.4. Conclusions

Discussion Questions

Exercises

6 Analyzing and Reporting Costs. Objectives

6.1. Tabulating Total Cost Using a Cost Worksheet. 6.1.1. Worksheet Basics

6.1.2. Total Cost

6.1.3. Average Cost per Student

6.2. Reporting Costs

6.2.1. By Site

6.2.2. Over Time

6.2.3. By Category of Ingredient

6.2.4. By Scale of Operation

6.2.5. By Subgroup

6.3. Allocating Costs Among Constituencies

6.3.1. Distributing Ingredients and Costs

6.3.2. Distributing Cash Subsidies

6.3.3. Calculating Net Costs to Each Constituency

6.4. Analyzing Cost Determinants and Generalizing Costs. 6.4.1. Context

6.4.2. Induced Costs

6.4.3. Sensitivity Testing

6.4.4. Decisionmaking

6.5. Conclusions

Discussion Questions

Exercises

7 Effectiveness. Objectives

7.1. Specifying Effectiveness. 7.1.1. Examples of Effectiveness Measures

7.1.2. Linking Objectives and Effectiveness

7.1.3. Single Measures of Effectiveness

7.1.4. Appraising Effectiveness Measures

7.2. Methods for Identifying Effectiveness. 7.2.1. Experiments, Quasi-Experiments, and Correlational Evaluations

7.2.2. Identification Strategies With Cost Analysis

7.2.3. Evidence From Meta-Analysis

7.3. Utility Analysis

7.3.1. Multiattribute Utility Theory

7.3.2. Methods of Assessing Single-Attribute Utility Functions

Proportional Scoring

The Direct Method

The Variable Probability Method

7.3.3. Methods of Assessing Importance Weights

7.3.4. Using Utility Measures

7.4. Conclusions

Discussion Questions

Exercises

8 Cost-Effectiveness Analysis. Objectives

8.1. Cost-Effectiveness Ratios

8.2. Alternative Cost-Effectiveness Metrics. 8.2.1. Cost-Utility Analysis

8.2.2. Effectiveness-Cost Ratios

8.2.3. Expected Value Cost-Effectiveness Ratios

8.2.4. Hybrid Cost-Effectiveness Ratios

8.3. Interpreting Cost-Effectiveness Ratios

8.4. Explaining Cost-Effectiveness Ratios. 8.4.1. Asymmetry of Cost-Effectiveness Ratios

8.4.2. Cost-Effectiveness Planes

8.4.3. Incremental Cost-Effectiveness Analysis

8.4.4. Cost-Effectiveness Analysis With Induced Costs

8.5. Evidence on Cost-Effective Interventions

8.6. Conclusions

Discussion Questions

Exercises

9 Estimating Benefits. Objectives

9.1. The Concept of Benefits

9.2. Specifying Benefits

9.3. Valuing Educational Benefits Through Earnings

9.4. Valuing Educational Benefits Through Shadow Pricing

9.4.1. Defensive Expenditure Method

9.4.2. Hedonic Method

9.4.3. Identifying Willingness to Pay From Trade-Offs

9.4.4. Contingent Valuation Method

9.5. Applying Benefits in Benefit-Cost Analysis

9.6. Conclusions

Discussion Questions

Exercises

10 Benefit-Cost Analysis. Objectives

10.1. Combining Benefits and Costs Into Economic Metrics

10.1.1. Net Present Value

10.1.2. Benefit-Cost Ratio

10.1.3. Internal Rate of Return

10.1.4. Break-Even Analysis

10.2. Performing Benefit-Cost Analysis

10.3. Examples of Benefit-Cost Analysis. 10.3.1. Investments in Preschool

10.3.2. Investments in Youth

10.3.3. Benefit-Cost Analysis in Developing Countries

10.3.4. Programs to Increase Wages for Welfare Recipients

10.4. Conclusions

Discussion Questions

Exercises

11 Accounting for Uncertainty. Objectives

11.1. Types of Uncertainty and Sensitivity

11.2. General Sensitivity Testing

11.3. Sensitivity Testing of Cost Estimates

11.4. Sensitivity Testing of Cost-Effectiveness

11.5. Sensitivity Testing of Benefit-Cost Analysis

11.6. Distributional Issues

11.7. Conclusions

Discussion Questions

Exercises

12 Checklist for Economic Evaluations. Objectives

12.1. A Checklist for Appraising Economic Evaluations

12.2. Appraising Economic Evaluations

12.3. Conclusions

Discussion Questions

Exercises

13 Economic Evaluations for Education Policy. Objectives

13.1. Applying Economic Analysis

13.2. Expanding the Use of Economic Evaluation

13.3. Decisionmaking and Economic Evaluation

13.4. Prioritizing Educational Investments

13.5. Using Economic Evaluations to Improve Education Research

13.6. The Future of Economic Evaluation of Education

13.7. A Final Word

Discussion Questions

Appendix A Answers to Even-Numbered Exercises. Chapter 2. Question 2

Chapter 3. Question 2

Chapter 4. Question 2

Chapter 5. Question 2

Chapter 6. Question 2

Chapter 6. Question 4

Chapter 7. Question 2

Chapter 8. Question 2

Chapter 9. Question 2

Chapter 10. Question 2

Chapter 11. Question 2

Appendix B CostOut Tool. Purpose of CostOut

How CostOut Aids Analysis

What CostOut Does and Does Not Do

For More Information

References

Index

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Third Edition

Third Edition

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The following table shows the results from a CE analysis by Harbison and Hanushek (1992). First, the range of possible educational interventions are specified; these are shown in the first column. The first category is infrastructure: the provision of potable water, of basic school furniture (e.g., desks), and additional school facilities (e.g., school offices), and then a combination of all these (“hardware”). The second category, material inputs, includes two interventions: (1) student textbooks and writing materials and (2) the combination (“software”). The teacher category includes two separate in-service teacher training programs (curso de qualificação and Logos II), either 4 or 3 years of additional formal schooling, and an increase in teacher salaries.

Source: Adapted from Harbison and Hanushek (1992, Table C6-1).

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