Costs and Returns of Education in Five Agricultural Areas of Eastern Brazil *

This study tests the hypothesis that education has a major role in agricultural development by estimating costs and returns of schooling and extension in areas at various modernization levels. Public and private costs are estimated from secondary information and farm surveys. Value-added and auxiliary equations, estimated from farm-level data, are used to derive annual re-turns of education. Although based on weak statistical results, schooling returns are negative or low, but increase with modernization level. Extension returns are generally high for individ-uals, but cover social costs in only two geographic areas. This suggests education's role in de-velopment may be limited. I T has been hypothesized that educationplays a major role in agricultural develop-ment. However, studies of the economics of education in the agricultural sector have been based largely on aggregate data from developed countries [4, 6, 11, 20]. Studies in developing countries have focused on the nonagricultural sector, while the agricultural sector has been almost entirely neglected with the exception of [3, 8]. This study estimates the costs and returns to formal schooling and agricultural extension in five areas representing different levels of agri-cultural modernization. The first section dis-cusses education's role in agricultural produc-tion. The second section describes the model used to measure the returns to education. The third section describes the areas studied. Fourth are the statistical results and estimated returns to schooling and extension. Fifth are the esti-mated costs of education, followed by the bene-fit-cost ratios and internal rates of return. Im-plications of the results are contained in the final section. Education's Role in Agricultural Production One way of conceptualizing the role of educa-tional activities (schooling or extension) in agri-cultural production is to consider education's impact on production of a firm. Welch [20] has attributed the value of education to a "worker effect " and an "allocative effect&quot