TOWARDS A NATIONAL INNOVATION STRATEGY FOR COMPETITIVENESSVOLUME 1stud<strong>en</strong>ts dep<strong>en</strong>d on public funding contributions for their education.Since the idea is to make the creation of human capital on a large scale viable, it is necessary tocomparatively analyze public funding for education, giv<strong>en</strong> that it is unlikely that much more family resourcescould be provided in the case of stud<strong>en</strong>ts from the three poorest quintiles. Let’s look at the evid<strong>en</strong>ce; wh<strong>en</strong>making international comparisons, it can be<strong>en</strong> se<strong>en</strong> that public sp<strong>en</strong>ding on education as a perc<strong>en</strong>tage of GDP[See Figure 8] and, moreover public sp<strong>en</strong>ding on education per person of school-going age, as a fraction of percapita income [See Figure 9], falls below the levels of refer<strong>en</strong>tial developing countries.Table 1Public sp<strong>en</strong>ding perstud<strong>en</strong>tPrivate sp<strong>en</strong>ding perstud<strong>en</strong>tTotal sp<strong>en</strong>ding perstud<strong>en</strong>tIncome Quintile (Ch$)I II III IV V500,412 477,987 441,687 411,686 276,40490,352 167,486 341,002 550,402 1,426,727590,764 645,473 782,689 962,088 1,703,132Source: Marcel M. And C. Tokman, Public Finance studies, Budget Office, Ministry ofFinance, 2005.The above implies that public sp<strong>en</strong>ding per stud<strong>en</strong>t is low, controlling for per capita income and theevid<strong>en</strong>ce that shows that countries sp<strong>en</strong>d more on education as they become richer. While it is true that theemphasis and resources rec<strong>en</strong>tly targeted at pre-school education, as well as the differ<strong>en</strong>tiated subsidy project,are steps in the right direction, the task of catching up in the skills level of our human resources will most likelyplace a significant additional demand on public and private resources.It would be premature to estimate the funding requirem<strong>en</strong>ts that closing the coverage and quality lagswould have. However, some approximation can be inferred through international comparisons. In fact,international comparisons place Chile at a total sp<strong>en</strong>ding per stud<strong>en</strong>t level below the average in 2003 for the37
TOWARDS A NATIONAL INNOVATION STRATEGY FOR COMPETITIVENESSVOLUME 1OECD for countries that are indisp<strong>en</strong>sable b<strong>en</strong>chmarks for Chile. Moreover, public sp<strong>en</strong>ding on education perperson of school-going age is curr<strong>en</strong>tly around 10% of the per capita income, far below the level of its peers,ev<strong>en</strong> wh<strong>en</strong> accounting for income level. [See Figure 9]Ev<strong>en</strong> though the differ<strong>en</strong>tial of public sp<strong>en</strong>ding is g<strong>en</strong>eralized in primary, secondary and third-leveleducation, the problem is more marked in the latter. To raise <strong>en</strong>rolm<strong>en</strong>t in third level education, the problemof funding could become a greater restriction further ahead as improvem<strong>en</strong>ts in the quality of secondaryeducation raise the number stud<strong>en</strong>ts prepared for <strong>en</strong>tering higher education. Not having the necessary fundingto cater to these new stud<strong>en</strong>ts would make the effort made in quality in primary and secondary levelspointless. 19The data pres<strong>en</strong>ted sheds light on the direction that educational policy should take over the next years,taking into account the demographic variables that indicate that the total school-going population of Chile willdrop in the next few decades, which would pave the way for an increase in the sp<strong>en</strong>ding per stud<strong>en</strong>t.The lesson of Taiwan, South Korea and Malaysia –which comm<strong>en</strong>ced with lower levels of developm<strong>en</strong>tthan Chile 30 years ago- is clear: much faster growth rates are accompanied by perman<strong>en</strong>t increases in thelevels of education (coverage and quality). This is ess<strong>en</strong>tial wh<strong>en</strong> considering the chall<strong>en</strong>ge of the knowledgeeconomy, because, in that context, only those who invest in learning the right way will advance faster andfurther. Moreover, if we consider that only developing human capital will allow for developm<strong>en</strong>t in sci<strong>en</strong>tificresearch and technological developm<strong>en</strong>t inputs that are fundam<strong>en</strong>tal for innovation and competitiv<strong>en</strong>ess.Giv<strong>en</strong> these large lags, the Council has chos<strong>en</strong> to abstain, for now, from defining other goals and morespecific indicators of human capital –as well as R+D, until possessing, thanks to studies already in progress, agreater degree of clarity with respect to the real specific needs of the country in the matter, thus avoiding anarbitrary extrapolation of the data that, ev<strong>en</strong> though it may be relevant in other countries, may not beappropriate for Chile 20 .19 Ev<strong>en</strong> at this level a financial estimate is risky. As will be se<strong>en</strong> in the next chapter, it is fully justified for the State to act as guarantorfor the private sector to finance stud<strong>en</strong>ts, based on problems of intangibility of assets and network economies. Nevertheless, theimplicit subsidies in the resulting interest rate should decrease with the income level of families, which could liberate curr<strong>en</strong>tlyuntargeted resources and, as such, ext<strong>en</strong>d coverage.20 Indicators such as the number of doctors per inhabitant or the number of <strong>en</strong>gineering professionals are commonly used as indicativedata on the gaps that the country needs to close in order to make progress on innovation and competitiv<strong>en</strong>ess. While some of theseconditions may be applicable to Chile, it is also possible that the main failures of the country may be found in other areas, be theyprofessional or technical, that the Council prefers to explore before proposing measures in a specific area.38