Schooling and Economic Well-Being: The Role of Nonmarket Effects

Standard estimates of the economic value of additional schooling, based on earnings differences associated with differences in the level of schooling attained, cover only a portion of the total effects of education that are valued by citizens. We first identify a catalog of nonmarketed effects, many of which have been recently studied by economists, and then propose a procedure for estimating a willingness-to-pay value for these effects. Using empirical estimates of the magnitude of a selection of these effects found in the literature, we calculate willingness-to-pay values using our proposed procedure. These illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments.