Investment and Inequality in Pakistan’s Education Sector

In this paper we present arguments for increasing expenditure on the education sector. We show that there exist large inequalities in the distribution of education services across regions and across genders so that ensuring equal opportunity for all in education, either for normative or economic reasons, will require large additional investments in this sector. We also present evidence which shows that while the rate of return to education in the country may not be high it has been increasing over time, so that higher expenditure on the education sector is also economically justifiable. Enrollments at all levels have been increasing over time, along with household and institutional expenditure on the education sector, which suggests a greater willingness to invest in education. If the productivity of education is low then it would be natural to expect a decline over time in the willingness of the people and the government to bear t he costs of education. But first, we examine the evidence about the increasing unemployment of educated labour and show that this does not mean that there is an economic surplus of education in the country, nor that the education sector is overextended, but that it can be explained by ‘search time’.