In 2015, OECD countries spent an average of 5% of their gross domestic product (GDP) on educational institutions from primary to tertiary levels, with large variations across OECD and partner countries.
Across OECD countries, the share of national resources devoted to educational institutions in non-tertiary education (primary, secondary and post-secondary non-tertiary levels) is 3.5% of GDP, much larger than the share devoted to tertiary education (1.5% of GDP). However, private sources play a crucial role in financing tertiary education accounting on average for around 25% of expenditure on educational institutions (0.4% of GDP).
Between 2010 and 2015, total expenditure on educational institutions from primary to tertiary levels as a share of GDP decreased in more than two thirds of OECD and partner countries, mainly due to the slower increase of public expenditure on educational institutions compared to GDP.
Education at a Glance 2018
Indicator C2. What proportion of national wealth is spent on educational institutions?
Figure C2.1. Total expenditure on educational institutions as a percentage of GDP (2015)
1. Year of reference 2016.
2. Primary education includes data from pre-primary and lower secondary education.
Countries are ranked in descending order of total expenditure on primary to tertiary educational institutions.
Source: OECD / UIS / Eurostat (2018), Table C2.1. See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Context
Countries invest in educational institutions to help foster economic growth, enhance productivity, contribute to personal and social development, and reduce social inequality, among other reasons. The level of expenditure on educational institutions is affected by the size of a country’s school-age population, enrolment rates, levels of teachers’ salaries, and the organisation and delivery of instruction. At primary and lower secondary levels (which correspond broadly to the population age 5 to age 14), enrolment rates are close to 100% in most OECD countries. Changes in the number of students are, therefore, closely related to demographic changes. This is less the case in upper secondary and tertiary education, as part of the concerned population has left the education system (see Indicator B1).
In order to account for these issues, this indicator measures expenditure on educational institutions relative to a nation’s wealth and demonstrates the priority given to education as a function of countries’ overall resources. National wealth is based on GDP, while expenditure on educational institutions includes spending by governments, enterprises, and individual students and their families. This indicator covers expenditure on schools, universities and other public and private institutions involved in delivering or supporting educational services.
Public budgets are highly scrutinised by governments, and during economic downturns, even core sectors like education can be subject to budget cuts. This indicator provides a point of reference, by showing how the volume of spending on educational institutions, relative to national GDP, has evolved over time in OECD countries. In deciding how much to allocate to educational institutions, governments must balance demands for increased spending in areas such as teachers’ salaries and educational facilities with other areas of investment.
Other findings
The largest share of expenditure on educational institutions is devoted to primary and lower secondary levels (48% of all OECD educational expenditure or 2.4% of GDP), and is a function of the total number of students enrolled.
The private sector in OECD countries directly funds 13% of total expenditure on educational institutions from primary to tertiary educational levels (before transfers between government and the private sector), representing 0.7% of GDP.
Between 2010 and 2015, expenditure on educational institutions as a share of GDP remained rather stable at tertiary levels and decreased slightly at non-tertiary levels by just over 6 % on average across OECD countries.
Analysis
Overall investment relative to GDP
The share of national wealth devoted to educational institutions is substantial in all OECD and partner countries. In 2015, 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% in Australia, Colombia, Canada, Chile, Israel, New Zealand, Norway, the United Kingdom and the United States to 3%-4% in the Czech Republic, Greece, Hungary, Ireland, Italy, Lithuania, Luxembourg and the Russian Federation (Figure C2.1 and Table C2.1). Many factors influence the relative position of countries on this measure including number of students enrolled, duration of studies, and the effective allocation of funds. At the tertiary level, spending may be influenced by the criteria to access 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 (3.5% of GDP) is directed to non-tertiary levels, due to the high levels of enrolment at these levels. The share of resources devoted to educational institutions at non-tertiary levels is around 4.5% of GDP in Iceland, Israel, New Zealand, Norway and the United Kingdom while it accounts for slightly less than 3% of GDP in the Czech Republic, Greece, Hungary, Ireland, Japan, Lithuania, Luxembourg, the Russian Federation and the Slovak Republic.
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 of the country. Countries with relatively high fertility rates are more likely to spend a larger share of their wealth on primary and lower secondary education. Indeed, all the countries where investment in primary education is below 1% of GDP are Central and East European countries with low birth rates (Austria, the Czech Republic, Germany, Hungary and Lithuania) (Table C2.1). At the upper secondary level, expenditure on educational institutions makes up 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. Of the 29 countries for which data are available, 12 spend more on vocational programmes than on general programmes, with the largest differences found in Finland (0.7 percentage points) and the Netherlands (0.6 percentage points). Post-secondary non-tertiary education, which often has vocational components, is the object of considerably less expenditure across the OECD, representing about 0.1% of GDP on average.
Tertiary education accounts for 1.5% of GDP on average. At this level, there is great variation among OECD countries in the pathways available to students, the duration of programmes, the organisation of teaching and the expenditure devoted to research and development (R&D), resulting in significant differences in expenditure. In 2015, Canada, Chile and the United States were the countries that spent the largest share of GDP on tertiary educational institutions (around 2.5%). Unsurprisingly, these countries also have some of the strongest participation by private sources of educational funding (after transfers to the private sector) at this level (1.2% of GDP for Canada and 1.7% for Chile and the United States; 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 the type and nature of research activities as well as the infrastructure and facilities available. OECD countries in which most R&D is performed by tertiary educational institutions tend to report higher share of expenditure on educational institutions over GDP than countries where R&D is mostly performed in other public institutions or by the industrial sector. Excluding R&D activities decreases expenditure in tertiary educational institutions as a share of GDP by 0.4 percentage points on average across OECD, 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, direct public expenditure on educational institutions from primary to tertiary educational levels (before transfers to the private sector) accounts for 4.2% of GDP. However, large differences are observed across countries with available data. In the Czech Republic, Greece, Hungary, Ireland, Italy, Japan, Lithuania, Luxembourg and the Russian Federation, public direct investment represents around 3% of GDP, while Nordic countries, such as Finland and Norway, and Costa Rica devote around 6% of their GDP in public direct expenditure on educational institutions (Figure C2.2).
From primary to tertiary education, 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 that operate apprenticeship programmes) comprise 0.2% of GDP on average across OECD countries, and they account for more than 0.4% of GDP in Australia, Chile and New Zealand and reaching 0.6% in the United Kingdom (Figure C2.2).
With tightening public budgets, many educational systems are turning more towards the private sector for additional investment. Particularly for tertiary education, rewarded by stronger premiums in the labour market, financial mechanisms are being used to leverage the participation of learners and third-party payers. The private sector, net of public transfers, is the direct source of 13% of total expenditure on educational institutions from primary to tertiary levels, accounting for 0.7% of GDP. Countries nevertheless differ considerably in the degree of direct private payments to educational institutions ranging from 0.1% or less of national GDP in Finland, Luxembourg and Norway, to 1.5%-2% in Australia, Chile and the United States (Figure C2.2).
At non-tertiary levels of education, direct private investment is low and accounts for 0.3% of GDP on average across OECD countries, but is at least 0.7% of GDP in Australia, Colombia and New Zealand which have the largest relative shares of private funds invested in non-tertiary education. At the tertiary level, however, direct private investment play a more crucial role, accounting on average for around 25% of expenditure on educational institutions, or 0.4% of GDP before even public to private transfers are accounted for. In some countries, private sources contribute to a large share of investment in tertiary education. Chile and the United States stand out for spending the largest percentage of GDP on tertiary educational institutions (at least 2.5% of GDP). This is partly driven by having the highest shares of private sources, even before accounting for public transfers to private entities (1.2% in Chile and 1.6% in the United States). In Australia and the United Kingdom, public transfers support about 25% of total expenditure for tertiary educational institutions, and around 20% in Chile, Ireland and New Zealand (Table C2.2 and Figure C2.2).
Figure C2.2. Total expenditure on educational institutions as a percentage of GDP, by source of funds (2015)
Note: International expenditure is aggregated with public expenditure for display purposes.
1. Year of reference 2016.
2. Net student loans rather than gross, thereby underestimating public transfers.
Countries are ranked in descending order of total expenditure on educational institutions per student.
Source: OECD / UIS / Eurostat (2018), Table C2.2. See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Changes in educational expenditure between 2010 and 2015
The effects of the global economic crisis that began in 2008 are currently 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). However, across OECD countries, total average expenditure on educational institutions at all levels as a percentage of GDP decreased by 4.1% between 2010 and 2015 (Table C2.3). Among the 28 countries with available data for this period, 20 of them experienced a reduction of the total expenditure on educational institutions as a share of GDP. Estonia, Ireland, Lithuania and Slovenia were among the countries with the largest negative adjustments, while the Slovak Republic was one of the major exceptions, with an increase of 14% (Figure C2.3).
Spending on the various levels of education evolved quite differently between 2010 and 2015. While expenditure on educational institutions relative to GDP remained rather stable at tertiary level, it decreased slightly at non-tertiary level (by just over 6%). However, this average masks significant changes in some countries. In Australia, Estonia, Ireland, Lithuania, Luxembourg, Slovenia and the United States, for example, expenditure on non-tertiary education as a share of GDP decreased by at least 10% over the five-year period. The reduction observed in Ireland (40%) can be mainly explained by a revision in its 2015 GDP data. Over the same period, Israel experienced one of the highest increases in the share of expenditure on these educational levels (13%).
At the tertiary level, stable investments are observed between 2010 and 2015 on average across OECD countries. Indeed, about a third of countries with available data increased their investments in tertiary education between 2010 and 2015, although their spending at non-tertiary levels has declined. Some clear examples are Australia and the Slovak Republic who increased their share of GDP invested on tertiary educational institutions by 21% and 74% but decreased their investments in non-tertiary educational institutions by at least 4% during this period. The increase in total tertiary spending as a share of GDP in the Slovak Republic, the largest across OECD and partner countries, is mainly driven by a substantial increase in both public and private investment on education.
Figure C2.3. Change in total expenditure on educational institutions as a percentage of GDP between 2010 and 2015
1. Primary education includes data from pre-primary and lower secondary education.
2. Year of reference 2016.
Countries are ranked in descending order of the change in total expenditure on educational institutions as a percentage of GDP for primary to tertiary educational levels.
Source: OECD / UIS / Eurostat (2018), Table C2.3. See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Definitions
Expenditure on educational institutions refers to public, private and international expenditure on entities that provide instructional services to individuals or education-related services to individuals and other educational institutions (schools, universities and other public and private institutions).
Initial public, private and international shares of educational expenditure are the percentages of total education spending originating in, or generated by, the public, private and international sectors before the flow of transfers. Initial public spending includes both direct public expenditure for educational institutions and transfers to the private sector and excludes transfers from the international sector. Initial private spending includes tuition fees and other student or household payments to educational institutions, minus the portion of such payments offset by public subsidies. Initial international spending includes both direct international expenditure for educational institutions (for example a research grant from a foreign corporation to a public university) and international transfers to governments.
Final public, private and international shares are the percentages of educational funds expended directly by public, private and international purchasers of educational services after the flow of transfers. Final public spending includes direct public purchases of educational resources and payments to educational institutions. Final private spending includes all direct expenditure on educational institutions (tuition fees and other private payments to educational institutions), whether partially covered by public subsidies or not. Private spending also includes expenditure by private companies on the work-based element of school- and work-based training of apprentices and students. Final international spending includes direct international payments to educational instructions such as research grants or other funds from international sources paid directly to educational institutions.
Public subsidies to households and other private entities for educational institutions include public and international transfers, such as scholarships and other financial aid to students, plus certain subsidies to other private entities. Therefore, they are composed of government transfers and certain other payments to households, insofar as these translate into payments to educational institutions for educational services (for example, fellowships, financial aid or student loans for tuition). They also include government transfers and some other payments (mainly subsidies) to other private entities, including subsidies to firms or labour organisations that operate apprenticeship programmes and interest subsidies to private financial institutions that provide student loans, etc.
Direct public expenditure on educational institutions can take the form of either purchases by the government agency itself of educational resources to be used by educational institutions or payments by the government agency to educational institutions that have responsibility for purchasing educational resources.
Direct private (from households and other private entities) expenditure on educational institutions includes tuition fees and other private payments to educational institutions, whether partially covered by public subsidies or not.
Methodology
Data appearing in earlier editions of this publication may not always be comparable to data shown in the 2018 edition due to changes in definitions and coverage.
Expenditure on educational institutions as a percentage of GDP at a particular level of education is calculated by dividing total expenditure on educational institutions at that level by GDP. Expenditure and GDP values in national currency are converted into equivalent USD by dividing the national currency figure by the purchasing power parity (PPP) index for GDP. The PPP conversion factor is used because the market exchange rate is affected by many factors (interest rates, trade policies, expectations of economic growth, etc.) that have little to do with current relative domestic purchasing power in different OECD countries (see Annex 2 for further details).
All entities that provide funds for education, either initially or as final payers, are classified as either governmental (public) sources, non-governmental (private) sources or international sources, such as international agencies and other foreign sources. Figures presented here group together public and international expenditure for display purposes. As the share of international expenditure is relatively small compared to other sources, its integration into the public sources does not affect the analysis of the share of public spending.
Not all spending on instructional goods and services occurs within educational institutions. For example, families may purchase commercial textbooks and materials or seek private tutoring for their children outside educational institutions. At the tertiary level, students’ living expenses and foregone earnings can also account for a significant proportion of the costs of education. All expenditure outside educational institutions, even if publicly subsidised, is excluded from this indicator. Public subsidies for educational expenditure outside institutions are discussed in Indicators C4 and C5.
A portion of the budgets of educational institutions is related to ancillary services offered to students, including student welfare services (student meals, housing and transport). Part of the cost of these services is covered by fees collected from students and is included in the indicator.
Expenditure on educational institutions is calculated on a cash-accounting basis and, as such, represents a snapshot of expenditure in the reference year. Many countries operate a loan payment/repayment system at the tertiary level. While public loan payments are taken into account, loan repayments from private individuals are not, and so the private contribution to education costs may be under-represented.
It should be noted that student loans provided by private financial institutions (rather than directly by a government) are counted as private expenditure, although any interest rate subsidies or government payments on account of loan defaults are captured as under public funding.
For more information please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[1]) and Annex 3 for country-specific notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Lithuania was not an OECD member at the time of preparation of this publication. Accordingly, Lithuania does not appear in the list of OECD members and is not included in the zone aggregates.
Source
Data refer to the financial year 2015 (unless otherwise specified) and are based on the UNESCO, OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2017 (for details see Annex 3 at http://dx.doi.org/10.1787/eag-2018-36-en). Data from Argentina, China, Colombia, India, Indonesia, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).
The data on expenditure for 2005, 2011 to 2015 were updated based on a survey in 2017-18, and expenditure for 2005 to 2014 were adjusted to the methods and definitions used in the current UOE data collection.
Note regarding data from Israel
The statistical data for Israel are supplied by and are under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Reference
[1] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classifications, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.
Indicator C2 Tables
Table C2.1. Total expenditure on educational institutions as a percentage of GDP (2015)
Table C2.2. Total expenditure on educational institutions as a percentage of GDP, by source of funds (2015)
Table C2.3. Change in total expenditure on educational institutions as a percentage of GDP (2005 to 2015)
Table C2.4. (web only) Change in public expenditure on educational institutions (final source of funds) as a percentage of GDP (2005 to 2015)
Cut-off date for the data: 18 July 2018. Any updates on data can be found on line at http://dx.doi.org/10.1787/eag-data-en. Data can also be found at http://stats.oecd.org/, Education at a Glance Database.
Table C2.1. Total expenditure on educational institutions as a percentage of GDP (2015)
Direct expenditure within educational institutions, by level of education
Note: See Definitions and Methodology sections for more information. Data and more breakdowns available at http://stats.oecd.org/, Education at a Glance Database.
1. Primary education includes data from pre-primary and lower secondary education.
2. Year of reference 2016.
Source: OECD / UIS / Eurostat (2018). See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Please refer to the Reader’s Guide for information concerning symbols for missing data and abbreviations.
Table C2.2. Total expenditure on educational institutions as a percentage of GDP, by source of funds (2015)
Direct expenditure within educational institutions, by level of education
Note: Some levels of education are included with others. Refer to “x” code in Table C2.1 for details. See Definitions and Methodology sections for more information.
Data and more breakdowns available at http://stats.oecd.org/, Education at a Glance Database.
1. Primary education includes data from pre-primary and lower secondary education.
2. Year of reference 2016.
3. The figures for the United States are for net student loans rather than gross, thereby underestimating public transfers.
Source: OECD / UIS / Eurostat (2018). See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Please refer to the Reader’s Guide for information concerning symbols for missing data and abbreviations.
Table C2.3. Change in total expenditure on educational institutions as a percentage of GDP (2005 to 2015)
Index of change (GDP deflator 2010 = 100, constant prices), direct expenditure within educational institutions, by level of education
Note: Some levels of education are included with others. Refer to “x” code in Table C2.1 for details. See Definitions and Methodology sections for more information.
Data and more breakdowns available at http://stats.oecd.org/, Education at a Glance Database.
1. Primary education includes data from pre-primary and lower secondary education.
2. Year of reference 2016.
Source: OECD / UIS / Eurostat (2018). See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Please refer to the Reader’s Guide for information concerning symbols for missing data and abbreviations.