An early education push helped the region create a broad, technically inclined human capital base well-suited to rapid economic development
Asia's education strategy was to focus spending on the lower grades: first by providing universal primary education, later by increasing the availability of secondary education. Rapid demographic transitions facilitated these efforts by slowing the growth in the number of school-age children and in some cases causing an absolute decline. Declining fertility and rapid economic growth meant that, even when education investment as a share of GDP remained constant, more resources were available per child in East Asian regions than in other developing regions. And success in education was aided by high income growth and more equal income distribution.[1]
Limited public funding of post-secondary education focused on technical skills, and some of East Asia's eight high-performing economies, or HPAEs---Hong Kong, Indonesia, Japan, Malaysia, the Republic of Korea, Singapore, Taiwan (China), and Thailand---imported educational services on a large scale, particularly for disciplines requiring high skills.
The allocation of public resources to basic education was the major determining factor in East Asia's successful educational strategies (see the table).
Higher shares of national income devoted to education cannot fully explain the larger accumulation of human capital in the HPAEs. In both 1960 and 1989, public expenditure on education as a percentage of GNP was not much higher in East Asia than elsewhere. For the past 30 years, the governments of East Asia markedly increased the share of national output they invested in formal education. But so did govern- ments in other developing regions. In 1989 the share in Africa, 4.1%, was higher than the East Asian share, 3.7%, which barely exceeded the average share for all developing economies, 3.6%.
What East Asia has done differently is to allocate a consistently higher share of public expenditure for education to primary schooling than elsewhere. Korea and Venezuela provide an extreme example. In 1985 Venezuela allocated 43% of its education budget to higher education; by contrast, in the same year Korea allocated only 10% of its budget to higher education. Public expenditure on education as a percentage of GNP was actually higher in Venezuela (4.3) than in Korea (3.0). After the share going to higher education is subtracted, however, public spending on basic education as a percentage of GNP was much higher in Korea (2.5) than in Venezuela (1.3).
The share of public funds allocated to tertiary education in East Asia has tended to be low, averaging roughly 15% during the past three decades. In Latin America the share has been roughly 24%.
Because of the focus on basic education, in East Asia public funds for schooling are more likely to benefit low-income children who otherwise might not stay in school.
By giving priority to expanding the primary and secondary bases of the educational pyramid, East Asian governments have stimulated the demand for higher education while relying to a large extent on the private sector to satisfy that demand. In all developing regions the probability of going to university is markedly higher for secondary school graduates from high-income families than for those from low-income families. Typically, in low- and middle-income economies, public subsidies for university education are not related to need, implying that they benefit families with relatively high incomes.
The high performance of Asian children on cognitive skills tests (of algebra, arithmetic, geometry, and measurement) reveals that the focus on primary education has paid off. In the relatively few international comparisons available from such tests, East Asian children perform better than children from other developing regions---and recently, better than children from high-income economies. In one such test of performance conducted in 20 diverse countries, Japanese students ranked first, and students from Hong Kong were in the top half of the distribution.
Human resources and the training to upgrade them have been important to the HPAEs' successful export drives, despite the high labor intensity of their manufactured exports. High-level skills are essential for a range of manufacturing-related activities. Moreover, adaptive innovations on the shop floor, which are responsible for a major share of productivity growth in manufacturing, demand both higher- and lower-level skills. But vocational training is rarely cost-efficient when provided in the school systems. Firms prefer to do their own training, partly because many skills are firm-specific.
Some government efforts to promote training have gone awry. According to one study, Korea's 1974 Special Law for Vocational Training, which required firms to provide six months of training in approved schemes, discouraged firm-level training; firms considered the period too long and opted to pay a fine instead. But Singapore succeeded by using training to promote the information technology sector. Singapore has achieved world leadership in information- related services through a concerted program that involved technical education institutions, training subsidies to schools and office workers, computerization of the civil service, and establishment of TradeNet, a global information network.
Education and labor markets (7K Box Text)
