Cost effectiveness analysis

Definition

Where benefits or outcomes cannot be measured or even approximated in monetary terms, another technique must be used; namely cost-effectiveness analysis. This technique compares alternatives such as different types of school (for example general versus vocational schools), different combinations of inputs (teachers, books and other learning materials) or different educational programmes (for example different types of teacher training) in terms of their effectiveness, measured by variables such as examination results, test scores, retention or completion rateĀ (Woodhall, 2004: 26).

Source :

Woodhall, M. 2004. Cost-Benefit Analysis in Educational Planning. Fundamentals of Educational Planning, 80. Paris: UNESCO-IIEP.

Example of use

Cost-effectiveness analysis consists of three steps: (a) The costs of the alternatives must be carefully measured, for example expenditure on teacher salaries, books and learning materials in each type of school; (b) the outcomes or educational effectiveness of the alternatives must be measured, for example by standardized test scores of pupils in each school; finally, (c) costs and effectiveness measures are combined to calculate a cost-effectiveness ratio, for example by dividing the effectiveness of each alternative by its cost to show the unit cost of achieving a particular objective, such as a 1 per cent improvement in pupil achievement. Such a ratio is described in one cost-effectiveness study as "the achievement gain per dollar spent" (Harbison and Hanushek, 1992: 140). The most cost-effective alternative can then be identified - for example the school that produces the greatest improvement in pupil achievement for a given cost or alternatively the school where pupils achieve the required examination results at least cost (Woodhall, 2004: 26).

Source :

Woodhall, M. 2004. Cost-Benefit Analysis in Educational Planning. Fundamentals of Educational Planning, 80. Paris: UNESCO-IIEP.