Education externalities are social or public benefits from the education of each individual that benefit others in the society in both current and future generations.
Titled Social and External Benefits of Education, chapter 6 of the publication, International Handbook on the Economics of Education, explores the non-market private or the non- market externality benefits of education that are taken into account by individuals when they make their decisions about how far to go in school. The paper defines the theoretical basis for the identification and estimation of education externalities, including distinguishing market from non- market impacts, as well as a static shorter-term view from a dynamic longer- term view of the neoclassical model. It also presents a taxonomy of education’s public good externalities and reviews estimates in the literature of the overall size and value of these externalities. It considers estimates of the non-market impacts of education on specific development goals, and identifies the separate private non-monetary returns in order to distinguish them from the public good development outcomes. Finally, it considers the implications for investment criteria, and summarizes the conclusions, qualifications and the needs for further research.
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