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APPENDIX 1.
APPENDIX 1. The Procedure for Calculating the Effectiveness of the Investment in Education
1. The Method for Calculating the Stock of Educational Capital or the Cumulative Investment in Education, in Japan


The method adopted in calculating the stock of educational capital in Japan is as follows.

In making an estimation of the stock of educational capital, the efficient life of the educational investment must be taken into account, because the productive life of a school graduate is limited. Considering average productive life of graduates, it was assumed that the efficiency of educational capital would endure as follows, on the average:

Capital invested in elementary education . . . . . . . . . . 45 years

Capital invested in secondary' education and in teacher training. . . 40 years

Capital invested in higher education ............. 35 years

The average lenghth of efficient service, service life of capital invested in social education and educational administration was assumed to be 40 years.

The estimation of educational capital was based on the accumulation of yearly public educational expenditures spent bar the national government and local public bodies and of yearly private school expenditures. Consideration of personal educational expenditures spent by pupils and their parents, as well as expenditures spent by private firms for education and training of their employees was excluded, because of the unavailability of data. Thus, the calculation was not a measurement of the total stock of educational capital, but was sufficiently close to the total for the purpose intended.

In calculating the stock of educational capital for a specific year, the first step was to accumulate those educational expenditures which had been spent during the preceding period, i.e., 45 years for elementary education expenditures. 40 years for expenditures for secondary education and teacher training, 35 years for higher education expenditures, and 40 years for expenditures for educational administration and social education. The accumulation included no costs of education spent in or before 1884, because accurate data were not available. It is considered, however, that such expendittures were negligible.

All cumu1ative expenditures were converted to the currency values of 1960. The converted cumulative expenditures, or stock of educational capital, are shown in the following tabulation at five-year intervals for the period 1905-1960.

Cumulative Amounts of Educational Expenditures, 1905-1960(Converted to currency value of 1960)

The cumulative amounts presented here represent the total amount of expenditures spent for all school graduates including those not employed in industry. The next step was to calculate the amount actually invested in producing a labor force, that is, the stock invested in graduates who entered the labor force. For this purpose, the above amounts NVCIC were multiplied by the percentage of graduates employed. The percentage of persons employed varies little among different age groups, but varies greatly between men and women. The proportion of productive-age women employed was about 55 per cent in 1920 and about 50 per cent from 1930 through 1960, while the proportion of productive-age men employed was about 98 per cent in 1920 and about 97 per cent from 1930 through 1960. Our estimation of the percentages of graduates employed is shown for selected years in the following table.

Percentage of School Graduates Participating in the Labor Force

Stock of Educational Capital, 1905-1960

In estimating these percentages, allowance was made for the percentage distribution by sex of graduates from each school level.

The table below shows, for the years indicated, the stock of educational capital, which is the cumulative educational expenditures multiplied by the percentage of graduates employed.


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