Private vs. public expenditure

by Dirk Van Damme
Division Head, Innovation and Measuring Progress (IMEP) and Head of Centre for Educational Research and Innovation (CERI)

Tertiary education institutions such as colleges and universities raise an increasing share of their funding from private sources. As the latest issue of the OECD’s Education Indicators in Focus details, the major part comes from households via tuition fees and other forms of household expenditure, but institutions also raise more contributions from private companies. Private expenditure now accounts for 30% of expenditure in tertiary education. As the latest issue of the OECD brief series Education Indicators in Focus details, the increase in private expenditure between 2000 and 2009 in OECD countries is remarkable. On average across OECD countries it more than doubled, but countries like Austria, Portugal and the Slovak Republic had growth indexes exceeding 500 points. In 2000, the United Kingdom already drew 32.3% of its expenditure on tertiary education from private sources and further increased it to 70.4% in 2009. The United States, usually seen as a country with the highest level of private expenditure, has seen a decrease from 68.9% in 2000 to 61.9% in 2009.

A simplistic interpretation might suggest that countries have substituted public funding with private resources. On the contrary the evidence shows that the increase in private expenditure did not occur at the expense of public funding. In addition, public funding for tertiary education increased in the same period from an index of 100 in 2000 to an index of 138 points in 2009 across the OECD. Countries such as the Czech Republic, Korea and Poland have seen increases for public funding to more than 180 index points.

The growth rates of public and private expenditure to tertiary education institutions are quite different across countries. Some countries combine high growth rates for both public and private expenditure, such as Austria, the Czech Republic, Mexico and the Slovak Republic. In other countries public and private expenditure have dissimilar growth patterns: Denmark, Portugal and the United Kingdom combined a higher than average growth index for private expenditure with a lower than average growth index for public expenditure for tertiary education.

With different growth rates, both public and private expenditure on tertiary education institutions increased between 2000 and 2009. However, the variation between countries in the relative proportion of private expenditure remains very high, from the Nordic countries with 10% or less private expenditure, to the United States and the United Kingdom with around 60% and 70%, respectively. Private resources have added to public expenditure, and at the country level, a higher level of private expenditure in tertiary education is not associated with lower chances for students from disadvantaged backgrounds to access tertiary education.

For more information
On this topic, visit:
Education Indicators in Focus: www.oecd.org/education/indicators 
On the OECD’s education indicators, visit:
Education at a Glance 2012: OECD Indicators: www.oecd.org/edu/eag2012 
On the OECD’s Indicators of Education Systems (INES) programme, visit:
INES Programme overview brochure
Chart source: Education at a Glance 2012: Indicator B3 (www.oecd/edu/eag2012)