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**Table 3: Sources of rich country advantage in resource availability for education**

|Indicator|Item in<br>equation (1)|Country an<br>G<br>A: $200|d per capita<br>NP<br>B: $3,000|Country B's<br>advantage<br>over A**d'**|% contribution<br>to country B's<br>advantage|
|---|---|---|---|---|---|
|Budget allocations||||||
|Overall govt. budget as % of GNP'|G,GNP|26.8|31.7|1.18|12.1|
|Education as % of overall govt. budget|G,/Gt|13.4|16.7|1.25|16.3|
|Student aid as % of education budget||9.8|5.4|1.05|1.8|
|Education budget as % of GNP||3.2|_5.0_|_1.55_|30.2|
|Demographic burden a|P.a/Pt|23.0|17.5|1.31|18.9|
|Teacher pay b'|TS/(GNP/P)|6.3|3.0|2.08|50.9|
|Spending per school-aged population c/|-|-|-|4.23|100|

Source: columns 3 and 4 are simulated from regression estimates of the relation between the corresponding indicator and per capita GNP, based on the data for some 125 countries in 1993; the last two columns are authors' computation, following procedures explained in the text.

a/ Population aged 6-1 1 as percent of total population.

b/ As ratio of the per capita GNP.

c/ This item is equal to the product of the components on the left-hand-side of equation (1"'), i.e. the product of the first two items in column 2, and the inverse of the third and fourth items in the column.

d/ In the framework of equation (1"'), country B's advantage is computed, for the first two items listed, as the ratio of its indicator to that of A; and for the last two items, as the inverse of its indicator to that of A. For the third item, the calculation is explained in the text.

We turn next to consider the other sources of country B's advantage in resource availability for education. A lighter demographic burden is an important source of advantage because it means more can be spent per school-age child.<sup>2 4</sup> Table 3 shows that whereas the share of the school-age children in the population is 23 percent in country A, it is only 17.5 percent in country B. With a smaller school-age population country B can allocate more resources for education per child. If A and B have the same aggregate budget for education as well as the same population size, the resources available per child of school-age would in fact be 31 percent (= (23.0/17.5) x 100) greater in country B.

Finally, because teachers are a key input in the production of education services, differences in the relative cost of teachers also influence the resources that are effectively available for education. As countries grow richer in the course of economic development the prices of most goods and services tend to rise in absolute terms, as does teachers' pay. Our simulations show that teachers earn, on average, $9,084 a year in country B compared with

> 24 For our purpose we measure demographic burden as the ratio of the population aged 6-1 1 to the total population. Because our focus here is on overall educational development, it would have been better to include in the numerator the population over a wider age range, say 6-23, so as to encompass students at al three levels of schooling. However, population structures are relatively stable, and as the accounting exercise involves comparing relative rather than absolute demographic burdens, we simply used the population data that are most readily available, i.e. those for the population aged 6-11, to compute the demographic burden.