Indicator C2. What proportion of national wealth is spent on educational institutions?

Overall investment relative to GDP

The share of national wealth devoted to educational institutions is substantial in all OECD and partner countries. In 2018, OECD countries spent on average 4.9% of their GDP on educational institutions from primary to tertiary levels (Table C2.1).

Expenditure on primary to tertiary educational institutions relative to GDP varies between 6% or more in Chile, Israel, New Zealand, Norway, the United Kingdom and the United States to 3-4% in Greece, Hungary, Ireland, Japan, Lithuania, Luxembourg, the Russian Federation and the Slovak Republic (Figure C2.1 and Table C2.1). Many factors influence the relative position of countries on this measure, including the relative number of students enrolled, the duration of studies and the effective allocation of funds. At the tertiary level, spending may be influenced by the criteria for accessing higher levels of education, the number of students enrolled across sectors and fields of study, as well as the scale of investment in research activities.

Expenditure on educational institutions by level of education

In all OECD and partner countries with available data, the share of national resources devoted to educational institutions in non-tertiary education (primary, secondary and post-secondary non-tertiary levels) is much larger than the share devoted to tertiary education (Table C2.1 and Figure C2.1). On average across OECD countries, 71% of expenditure on educational institutions, or 3.4% of GDP, is directed to non-tertiary levels, due to the high enrolment rates at these levels. The share of resources devoted to educational institutions at non-tertiary levels is at least 4.5% of GDP in Iceland, Israel, New Zealand and Norway, while it accounts for 2.4% or less of GDP in Ireland, Lithuania and the Russian Federation (Table C2.1).

On average across OECD countries, expenditure on educational institutions amounts to 1.5% of GDP at the primary level and 0.9% at lower secondary level. However, the share of expenditure on educational institutions is strongly influenced by the demographic composition in each country, as well as the duration of each level of education. Countries with relatively low fertility ratesare more likely to spend a smaller share of their wealth on primary and lower secondary education (OECD, 2020[1]). Indeed, the countries where investment in primary education is 1% of GDP or lower also tend to be those with low birth rates (e.g. Austria, the Czech Republic, Germany, Hungary, Lithuania and the Slovak Republic) (Table C2.1). At upper secondary level, expenditure on educational institutions accounts for 0.5% of GDP in vocational programmes and 0.6% of GDP in general programmes on average across OECD countries. However, these figures vary widely between countries. Around one-third of countries with available data spend more on vocational programmes than on general programmes, with the largest differences found in the Czech Republic, Finland and the Netherlands (0.5 percentage points) (Table C2.1).

Tertiary education accounts for 1.4% of GDP on average. At this level, the various pathways and programmes available to students, the duration of programmes, the organisation of teaching, and research and development (R&D) activity all influence the level of expenditure. In 2018, Canada, Chile, the United Kingdom and the United States were the countries that spent the largest share of GDP on tertiary educational institutions (2-3%). Unsurprisingly, these countries also have some of the highest levels of expenditure from private sources of educational funding after public-to-private transfers have been accounted for (1.1-1.6% of GDP) (Table C2.4 available on line and Figure C2.2).

R&D spending in tertiary educational institutions can represent a significant share of total spending at this level and depends on the organisation of publicly funded research as well as the infrastructure and facilities available. Expenditure levels tend to be higher in Australia, Finland, the Netherlands, Norway, Sweden and other OECD countries where most publicly funded R&D is performed by tertiary educational institutions than in countries where R&D is mostly performed in other institutions. If R&D activities are excluded, expenditure on tertiary educational institutions as a share of GDP decreases by 0.4 percentage points on average across OECD countries, although the difference is at least 0.7 percentage points in Denmark, Finland, Norway and Sweden (Table C2.1).

Expenditure on educational institutions by source of funds

Public spending remains the main source of educational funding in OECD countries. On average, public expenditure on educational institutions from primary to tertiary educational levels (after transfers to the private sector) accounts for 4.1% of GDP. However, large differences are observed across countries with available data. In Ireland, Japan, Lithuania and the Russian Federation, public investment represents less than 3.0% of GDP, while Costa Rica and Norway devote above 6.0% of their GDP to direct public expenditure on educational institutions (Table C2.4 available on line).

Public transfers to households (such as scholarships and loans to students for tuition and other fees) and subsidies to other private entities for education (e.g. to firms or labour organisations operating apprenticeship programmes) comprise almost 0.1% of GDP on average across OECD countries from primary to tertiary level. They account for 0.3% of GDP or more in Australia, Chile, Korea and New Zealand and reach almost 0.6% in the United Kingdom, mainly driven by public transfers at tertiary level (Table C2.4 available on line).

With public budgets tightening, many educational systems are turning increasingly towards the private sector for additional investment, particularly at tertiary level. After transfers, private sector expenditure on primary to tertiary educational institutions accounts for 0.8% of GDP on average. Countries nevertheless differ considerably in the contribution of private expenditure on educational institutions, ranging from 0.1% of GDP or less in Finland, Luxembourg and Norway to 2% or more in Australia, Chile and the United Kingdom (Table C2.4 available on line).

At non-tertiary levels of education, private investment is low and accounts for 0.3% of GDP on average across OECD countries after public-to-private transfers. However, it amounts to at least 0.7% of GDP in Australia, Chile, Colombia, New Zealand, Turkey and the United Kingdom, the countries with the largest relative shares of private funding of non-tertiary education. At the tertiary level, private investment plays a more significant role, accounting for 0.4% of GDP after transfers on average. In some countries, private sources contribute a larger share of GDP even before public transfers to households are taken into account. Countries such as Australia, Chile, Korea, Mexico and the United Kingdom devote 0.6% of GDP or more in private spending before transfers. After public transfers are taken into account, private investment represents 1.4% of GDP or more in Chile, the United Kingdom and the United States, the highest among OECD countries (Table C2.4 available on line and Figure C2.2).

Changes in educational expenditure between 2012 and 2018

Between 2012 and 2018, OECD countries increased public expenditure on educational institutions across all levels of education, but at a slower pace than average GDP growth (Table C2.2 and Figure C2.3). This pattern also holds when including private sources of expenditure. Exceptions to this pattern are Chile, Hungary, Iceland, Israel, Italy, the Slovak Republic and Sweden, where both public and total expenditure on educational institutions grew faster than GDP over this period (Figure C2.3).

On average, total expenditure from all sources on primary to tertiary educational institutions increased by 10.5% between 2012 and 2018, but since GDP grew at a higher pace (16.6%), total expenditure as a percentage of GDP fell by 4.6% (Table C2.3). More than two-thirds of OECD and partner countries with available data experienced a reduction in the total expenditure on educational institutions as a share of GDP, although this is in most cases the result of a higher rise in GDP compared to education expenditure. Lithuania and Portugal were among the countries with the largest negative adjustments over that period, due to increases in GDP over 5% combined with reductions in total expenditure on educational institutions. In contrast, in Chile, Hungary, Iceland, Israel, Italy, the Slovak Republic and Sweden the rise in total expenditure on educational institutions was equal to or exceeded the increase in GDP (Table C2.3).

Spending on the various levels of education evolved similarly between 2012 and 2018. Expenditure on educational institutions at the non-tertiary levels decreased by 2.6% relative to GDP. However, this average masks significant changes in some countries. In Chile, Hungary, Italy, Sweden and the Russian Federation, for example, expenditure on non-tertiary education as a share of GDP increased by at least 7% over this period. Over the same period, Lithuania, Luxembourg, Portugal and Slovenia experienced some of the largest decreases in the share of expenditure on these educational levels (over 12%), mainly explained by an increase in GDP superior to the the one in total exenditure on education (Table C2.3).

At the tertiary level, about one-third of countries with available data increased their investment relative to GDP between 2012 and 2018, even though their spending at non-tertiary levels declined or remained fairly stable. Clear example of this trend is the United Kingdom, which increased the share of GDP invested in tertiary educational institutions by over 10% but reduced the share invested in non-tertiary educational institutions during this period (Table C2.3).