copy the linklink copied!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 2016, OECD countries spent on average 5% 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 the Czech Republic, Ireland, Italy, 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 investments 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, 70% of expenditure on educational institutions, or 3.5% 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 around 4.5% of GDP in Israel, New Zealand and Norway while it accounts for 2% of GDP in the Russian Federation.

On average across OECD countries, expenditure on educational institutions amounts to 1.5% of GDP at the primary level and 1% at lower secondary level. However, the share of expenditure on educational institutions is strongly influenced by the demographic composition of the country. Another factor that affects expenditure by level of education is the duration of each level. Countries with relatively low fertility rates are more likely to spend a lower share of their wealth on primary and lower secondary education. Indeed, the countries where investment in primary education is below 1% of GDP also tend to be those with low birth rates (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. Less than half 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 (0.5-0.6 percentage points).

Tertiary education accounts for 1.5% 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 at this level. In 2016, Canada, Chile 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%-1.7% of GDP; Table C2.2 and Figure C2.2).

R&D spending in tertiary educational institutions can represent a significant share of total spending at this level and is a function of how the structure for publicly funded research is organises as well as the infrastructure and facilities available. Australia, Norway, Sweden and other OECD countries in which most publicly funded R&D is performed by tertiary educational institutions tend to report higher levels of expenditure on educational institutions as a share of GDP than 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, though the difference is at least 0.7 percentage points in Finland, Norway, and Sweden (Table C2.1).

Expenditure on educational institutions by source of funds

Government 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% of GDP. However, large differences are observed across countries with available data. In the Czech Republic, Italy, Japan, Lithuania, Luxembourg, the Slovak Republic and the Russian Federation, public investment represents around 3% of GDP, while Belgium, Brazil, Finland, Iceland, Norway and Sweden devote around 5%-7% of their GDP to direct public expenditure on educational institutions (Figure C2.2).

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Figure C2.2. Total expenditure on educational institutions as a percentage of GDP, by source of funds (2016)

After transfers; from public, private and international sources

Note: International expenditure is aggregated with public expenditure for display purposes.

1. Year of reference 2017.

2. The figures for the United States are for net student loans rather than gross, thereby underestimating public transfers.

3. Primary education includes pre-primary programmes.

Countries are ranked in descending order of total expenditure on educational institutions as a percentage of GDP.

Source: OECD/UIS/Eurostat (2019), Table C2.2. See Source section for more information and Annex 3 for notes (https://doi.org/10.1787/f8d7880d-en).

 StatLink https://doi.org/10.1787/888933978949

With tightening public budgets, many educational systems are turning more towards the private sector for additional investment, particularly at tertiary level. After transfers, private sector expenditure on primary to tertiary educational institutions accounts for 0.9% of GDP on average. Countries nevertheless differ considerably in the importance of private expenditure on educational institutions, ranging from 0.1% of GDP or less in Finland, Luxembourg and Norway, to 1.9% or more in Australia, Chile, the United Kingdom and the United States (Figure C2.2).

At non-tertiary levels of education, private investment is low and accounts for 0.4% of GDP on average across OECD countries. However, it amounts to at least 0.7% of GDP in Australia, Colombia, Mexico, 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 on average for 0.5% of GDP. In some countries, private sources contribute a larger share: private spending on tertiary institutions in Chile and the United States accounts for more than 1.6% of GDP, the highest among OECD countries (Table C2.2 and Figure C2.2).

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Figure C2.3. Index of change in public expenditure on educational institutions as a percentage of GDP (2010 and 2016)

Final sources of funds, by level of education, reference year 2010 = 100

1. Primary education includes pre-primary programmes.

Countries are ranked in descending order of the index of change in public expenditure on educational institutions as a percentage of GDP.

Source: OECD/UIS/Eurostat (2019), Table C2.4, available on line. See Source section for more information and Annex 3 for notes (https://doi.org/10.1787/f8d7880d-en).

 StatLink https://doi.org/10.1787/888933978968

Changes in educational expenditure between 2010 and 2016

The effects of the global economic crisis that began in 2008 are still reflected in the adjustments of public budgets and, therefore, in the expenditure on educational institutions across all levels of education. Public expenditure on educational institutions started to increase back in 2010 but at a slower pace than GDP, as a result of the time needed to adjust public budgets (Table C2.4, available on line, and Figure C2.3). However, across OECD countries, total average expenditure from all sources on primary to tertiary educational institutions as a percentage of GDP fell by 7% between 2010 and 2016, mainly as a result of a lower increase in spending compared to GDP (Table C2.3). Most countries with available data experienced a reduction in the total expenditure on educational institutions as a share of GDP with Ireland and Lithuania among the countries with the largest negative adjustments, all them with increases in GDP of over 20% over the same period. In contrast, Chile and Israel were two of the major exceptions, with an increase of 7% or more in the total expenditure on educational institutions despite also the significant increase of GDP.

Spending on the various levels of education evolved similarly between 2010 and 2016. Expenditure on educational institutions at the non-tertiary and tertiary levels decreased by 8% relative to GDP. However, this average masks significant changes in some countries. In Chile and Israel, for example, expenditure on non-tertiary education as a share of GDP increased by at least 5% over the six-year period. The reduction observed in Ireland (40%) can be mainly explained by a revision in its 2015 GDP data. Over the same period, Estonia, Lithuania and Luxembourg experienced some of the highest decreases in the share of expenditure on these educational levels (by over 20%).

At the tertiary level, about one-third of countries with available data increased their investments in tertiary education between 2010 and 2016, although their spending at non-tertiary levels declined or remained almost stable. Clear examples of this trend are Australia, Iceland, Israel, Norway and the Slovak Republic, which increased the share of GDP invested tertiary educational institutions by over 10% but reduced the share invested in non-tertiary educational institutions by at least 5% during this period. Israel’s increase in total tertiary spending as a share of GDP, the largest across OECD and partner countries, was mainly driven by a substantial increase in both public and private investment in education.