Returns to Investment in Education, the Case of Nicaragua

Dr. Mohamed Ayadi
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Relative to its GDP and to the Central Government’s budget, Nicaragua spends as much on education as any other country in Central America, yet it has the second highest illiteracy rate and one of the lowest primary school enrollment rates among Latin American countries. Part of the reason for Nicaragua’s relatively poorer performance has to do with the fact that on a per capita basis its expenditures are among the lowest in the region. Thus, while average expenditures on education per student in Central American and Panama amount to $362 per year, in Nicaragua they amount to only about $61. The other reason has to do with the Nicaraguan Constitution, which stipulates that 6 percent of the central government’s budget must be devoted to financing universities. As a result, Nicaragua spends 14 times as much per university student as per elementary school student, compared to an average ratio in Central America of about 5:1. Is Nicaragua maximizing the returns of its expenditures on education or is there a better way of allocating the budgetary resources devoted to education?

Keywords: Education Returns, Externalities, Budget Allocation
Stream: Economics and Management
Presentation Type: Paper Presentation in English
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Dr. Mohamed Ayadi

Associate Professor, Department of Finance, Operations, and Information Systems, Brock University
St Catharines, Ontario, Canada

Dr. Mohamed Ayadi is an Associate Professor of Finance, joined the Faculty of Business in 2001, received his Ph.D. in Finance from Concordia University, prior to joining Brock University, Dr. Ayadi taught at Concordia University and University of Quebec and also worked as a research analyst at the World Bank in Washington D.C. from 1996-97, he has taught a range of courses at both the undergraduate and graduate levels, including Financial Management, Corporate Finance, Investment Analysis, Portfolio Management, and Derivatives Securities.

Ref: I07P0400