Digest Finance
 

Methodological Techniques for Evaluating the Efficiency of Private Investment in Education

Vol. 24, Iss. 1, MARCH 2019

PDF  Article PDF Version

Received: 7 May 2018

Received in revised form: 20 June 2018

Accepted: 27 June 2018

Available online: 29 March 2019

Subject Heading: INNOVATION AND INVESTMENT

JEL Classification: G11, J24

Pages: 53-63

https://doi.org/10.24891/df.24.1.53

Bukreev I.A. V.I. Vernadsky Crimean Federal University, Yalta, Russian Federation
bukreev.igor@bk.ru

https://orcid.org/0000-0002-6903-946X

Subject The article discusses the methodological approaches to evaluating the efficiency of private investment in human capital as a self-expanding value driver. I spotlight education as a crucial component of human capital, which is considered as the self-expanding value driven by an increase in the staff labor productivity, salaries. I also treat it as the property represented with professional qualities.
Objectives The research aims to forge a technique for evaluating the cost effectiveness of investment in education as part of human capital investment by comparing income (average salaries at different levels of education) and training expenditures.
Methods I determined the required rate of return on investment in education, considering the use of alternative manpower and finance.
Results The rate of return is taken as equal tranches of additional income (annuity) throughout the entire employment period, including investment in education, and income lost for the period of training as alternative costs. Based on real indicators, I precisely measured the net return on investment in education at different levels.
Conclusions and Relevance The technique allows to determine whether a person effectively utilizes labor and financial resources as investment in education. The technique can be applied to evaluate the efficiency of private investment and require rate of return on investment in education.

Keywords: investment, education, human capital, productivity, potential income

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