The Effect of Education on Efficiency in Consumption

Robert T. Michael.
Occasional Paper 116 from the National Bureau of Economic Research.
Distributed by Columbia University Press

New York
1972
ISBN 0870142429

Page 88

The principal data source was the Bureau of Labor Statistics' 1960-61 consumer expenditures survey. Chapter 4 used these data at a fairly broad level of aggregation to study the shifts in expenditure patterns over slightly more than a dozen consumption categories, as well as the shifts between the two broad categories of goods and services. For the goods-services dichotomy the evidence, interpreted by the model developed here, suggests that the effect of education on nonmarket productivity is a positive one.

That is, the income elasticities indicate that, other things held constant including education, households with higher levels of income spend proportionately more of their total expenditure on services and that, other things held constant including money income, households with higher levels of education also spend proportionately more of their fixed total expenditure on services.

Thus, those with more education behave as if they had more real income, despite the tact that their permanent money income is held constant.

This is interpreted as evidence that the higher level of education enhances their capacity to produce useful commodities from a given level of factor inputs in the nonrnarket sector.