and the quality of education received, and the benefits of that education for the recipients and for society. Accordingly, both conceptual and measurement issues must be confronted.

Recommendation 5.1: An education satellite account, presented in nominal and real dollars, should be produced by the Bureau of Economic Analysis in collaboration with the National Center for Education Statistics (NCES).

MEASURING AND VALUING INPUTS

Market and government inputs to education can be estimated relatively easily, but estimating nonmarket inputs (other than those originating from the government) is difficult. A variety of data on market and government inputs to education are available, but data on nonmarket inputs are harder to find and much less complete.

Market and Government Inputs

Market and government inputs to education account for a substantial share of GDP: Table 5-2 gives a snapshot of the sources and uses of expenditures on education in 2001, and Table 5-3 gives a historical perspective. From the mid-1960s onward, education expenditures as a percentage of GDP hovered in the 5-6 percent range; this percentage was lower in earlier years. Spending for elementary and secondary education dominates other expenditures, accounting for approximately 70 percent of spending included in GDP. Not surprisingly, state and local spending is primarily for elementary and secondary education although, since 1970, about 20 percent of state and local expenditures are for higher education. Spending by state and local governments includes federal grants-in-aid to

TABLE 5-2 The Nation’s Education Dollar, 2001 (percent of expenditures)

Sources

Uses

Federal government

1

Primary and secondary education

71

State and local government

86

Higher education

22

Private education services

13

Other

7

NOTES: State and local government expenditures include grants-in-aid from the federal government that account for 4 percent of education spending. Shares were constructed with data from the National Income and Product Accounts (Tables 3.15 and 3.17) and GDP by industry data, available on the BEA website (www.bea.gov). Intermediate inputs to the private educational services industry, such as books and supplies, are excluded from GDP, while government expenditures for intermediate inputs are included in GDP.



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