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The Estimates of Private Internal Rates of Return on Educational Investment in the First Turkish Republic, 1923–1960

Published online by Cambridge University Press:  29 January 2009

M. T. Ozelli
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Extract

During the last decade or so, educational institutions of developing countries have attracted the attention of social scientists as the prime movers of structural changes in such societies. Furthermore, among some of those who are concerned with economic development and growth, there has emerged a common belief that a major barrier to economic development, probably, is not so much the scarcity of physical resources and capital, but rather the lack of trained manpower owing to insufficient or mismanaged investment in education.

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Articles
Information
International Journal of Middle East Studies , Volume 1 , Issue 2 , April 1970 , pp. 154 - 176
Copyright
Copyright © Cambridge University Press 1970

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References

page 154 note 1 For a heuristic model of demand analysis for educational facilities see Tunc, Ozelli, ‘Costs and Returns of Educational Investments in the First Turkish Republic’ (unpublished Ph.D. dissertation, Columbia University, 1968), chapter 3.Google Scholar

page 154 note 1 Milli, Eğitim Bakanliği, Mesleki ye Teknik öğretim Kurumlariyla Ilgili Rakkamlar [Statistics related to Institutions of Vocational Education] (Ankara: Milli Eğitim Bakanliği Mesleki ve Teknik öğretim Istatistik Müdürlüğu, 1963).Google Scholar

page 154 note 2 Miller, H.P., ‘Annual and Lifetime Income in Relation to Education: 1939–1959’, American Economic Review, vol. 50, no. 5 (December 1960), pp. 562–86.Google Scholar

page 154 note 3 The studies associate earnings of each occupation with the respective type and level of education.

page 154 note 4 Since every scale is defined in terms of educational requirements, and salary increases are based on seniority, our assumption is not unrealistic. However, it should, again, be explicitly stated that distribution of educational opportunity was largely influenced by the geographic and social position of the parents. The assumption seems not to have been unrealistic in the labor market, but was unrealistic for the educational markets.

page 154 note 5 William, G. Bowen, ‘Assessing the Economic Contribution of Education: An Appraisal of Alternative Approaches’, in Economic Aspects of Higher Education (Paris: OECD 1964), pp. 177–200;Google Scholar and Blaug, M., ‘The Rate of Return on Investment in Education in Great Britain’, The Manchester School of Economics and Social Studies, vol. 23, no. 3 (09 1965), pp. 205–51.Google Scholar

page 155 note 1 For a critique of G. S. Becker's correction see Mark, BlaugGoogle Scholar, ibid. pp. 205–51.

page 155 note 2 Every graduate of a certain level starts at the same salary and gets salary increases at the same intervals. Those who are promoted to directorships get compensation for managerial work. Our future income stream does not include additional compensation for managerial duties, which we assumed is based on ‘intelligence or other factors’.

page 155 note 3 The severest criticisms directed at the Barem have been its inability to reward individual performance, and that it stifles individual initiative. See Deviet Personel Teşkilat Incelemeleri [Research on State Personnel Organization] (Ankara: Turkiye ye Orta Doĝu Amine Idaresi Enstitusu, 1961).Google Scholar

page 155 note 4 It should be explicitly stated that, until the late fifties, no attempts had been made to ‘describe’ the amount of work involved at given levels in the hierarchies.

page 155 note 5 Establishment of educational requirements for different levels of the hierarchy have been a controversial issue in different stages of technological development. The educational requirements of the Barem are not an exception to the controversy.

page 155 note 6 In a social system where inability in dealing with nature is paramount, it is not irrational, it seems to me, to assume ability to cope with the environment to be some function of experience defined in terms of years spent on the job, and to minimize risk by centralizing authority and responsibility in the higher echelons of the hierarchy.

page 155 note 7 The Barem failed to offer significant income differentials to make the less developed regions attractive enough for the professionals. See Richard, D. Robinson, Letters from Turkey (Istanbul: Robert College, 1965, reprinted for the Peace Corps by permission of the Institute for Current World Affairs), RDR-33.Google Scholar

page 155 note 8 Since the salary scales of the Barem were defined in years of education completed, there were no economic gains attached to those skills short in supply.

page 159 note 1 Tune, OzelliGoogle Scholar, ibid. chapter 5.

page 159 note 2 Both the legal and administrative requirements for promotions were defined by Legal Act 1452. The legal requirements involve abstention from all acts declared illegal by the criminal courts, and administrative requirements involve carrying out the assignments of the Bureau with political impartiality.

page 159 note 3 An obvious ‘occupational shift’ stems from the administrative requirements of Barem scales, and application of seniority rule for promotions resulting in appointment of professionals to administrative positions. In a subsequent study we plan to collect data and analyze high-level manpower utilization in Turkey. The proposal is being negotiated with the State Planning Organization.

page 159 note 4 Since salary advancements are based on seniority, our assumption does not involve nepotism, intelligence, and other factors.

page 160 note 1 For a detailed discussion of educational policies see Tunc OzelliGoogle Scholar, ibid. chapter 2.

page 161 note 1 Tune, OzelliGoogle Scholar, ibid. chapter 2.

page 162 note 1 Tune, OzelliGoogle Scholar, ibid. chapter 2.

page 162 note 2 For a detailed discussion of the period see Kerwin, R. W., ‘Etatism and Industrialization of Turkey: A Study of Turkish National Economic Policies and Attitudes’ (unpublished Ph.D. dissertation, School of Advanced International Studies, Johns Hopkins University, 1956).Google Scholar

page 162 note 3 Andreas, M. Kazamias, Education and Quest for Modernity in Turkey (Chicago: The University of Chicago Press, 1967), pp. 226–59.Google Scholar

page 162 note 4 ‘Although Menderes did not quite understand the functioning of the market forces’, said his Minister of Economics, ‘intuitively some of the solutions he offered were in market terms, and some decried every premise the market system nourishes on.’

page 163 note 1 Strategic public enterprises were the major public enterprises that carried a good portion of industrial and infra-structural investments of the period.

page 163 note 2 Resmi Gazete (Official Gazette), 30 April 1958.Google Scholar

page 163 note 3 Resmi Gazete, loc. cit.

page 164 note 1 Martin, J. Bailey, ‘Formal Criteria for Investment Decisions’, Journal of Political Economy, vol. 67 (10 1959), pp. 476–88.Google Scholar

page 164 note 2 Pierre, Masse, Optimal Investment Decisions: Rules for Action and Criteria for Choice, An Introduction to the Basic Concepts and Applied Techniques of Managerial Decisions (Englewood Cliffs: Prentice-Hall, Inc., 1962), pp. 20–1.Google Scholar

page 165 note 1 Ruth, Klinov-Malul, The Profitability of Investment in Education in Israel (Jerusalem: The Maurice Falk Institute for Economic Research in Israel, 1966), pp. 57–61.Google Scholar

page 166 note 2 Gross pecuniary gains that accrue to the individual according to the Barem scales.

page 167 note 1 Keeping other uses of public funds constant.

page 167 note 2 Since a good portion of the costs of education is wages and salaries, any wage increases granted will also increase the cost of education, and affect rates of return on education.

page 167 note 3 For the period, Ministry of Education estimated it to be 30 T.L. including diploma fees.

page 168 note 1 Although there had been a decreasing trend in burses offered by increasing the supply of tuition-free schools, the Council of Ministers had increased subsidies to education.

page 168 note 2 Z. Gökalp's ‘idealist’. Idealism, the new Turkish nationalism was expected to inculcate, was to offer incentives to those who pursued higher education.

page 169 note 1 Tunc, OzelliGoogle Scholar, ibid. chapter 2.

page 172 note 1 In order to make some adjustment for the external economics Otto Eckstein suggests the rate of interest at which cost repayments if discounted should be reduced below the market rate: Eckstein, O., ‘The Problem of Higher College Tuition’, in Harris, S. E. (ed.), Higher Education in the United States (Cambridge: Harvard University Press, 1960). Our internal rate of return estimates pointed out that the private investments in higher education were profitable for the individual if the interest rate for private borrowings was roughly less than two per cent.Google Scholar

page 172 note 2 Blaug, M., ‘Approaches to Educational Planning’, The Economic Journal, vol. 77, no. 306 (06 1967).CrossRefGoogle Scholar

page 173 note 1 Since the income stream was paid by the public funds and some of the real resource costs were financed by public funds, reducing future income has the same effect as charging high interest rates on financing that portion of the costs of education.

page 173 note 2 Hanson, A. H., Some Problems Concerning State Enterprises in Turkey (Ankara: Turkiye ye Orta Doĝu Amme Idaresi Enstitusu, 1959).Google Scholar

page 173 note 3 The Turkish burs system has not been a system of scholarships as the term is used in the United States. Students who receive burses are legally bound to accept employment with the government bureaucracy for twice the period of time they have received the burs or pay the total burs bill compounded at six to eight per cent interest rate.