On the private benefits of subsidies to education

Using the method of compensating variation, this article deals with imputing the benefits of government expenditures on education to individual households. A distinction is made between the student and the parents as decisionmakers. Theory then indicates under what conditions benefits should be imputed to the student and to the parents. The conventional rule of imputing expenditures in proportion to participation is generally not valid, mainly because of discontinuities in choice of education. The sum of direct private benefits may deviate substantially from total expenditures. Magnitudes are indicated in an illustration. Possibilities for systematic empirical application are discussed.