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Economic Evaluation in Education

Economic Evaluation in Education
Cost-Effectiveness and Benefit-Cost Analysis

Third Edition

© 2018 | 376 pages | SAGE Publications, Inc

The past decade has seen increased attention to cost-effectiveness and benefit-cost analysis in education as administrators are being asked to accomplish more with the same or even fewer resources, philanthropists are keen to calculate their “return on investment” in social programs, and the general public is increasingly scrutinizing how resources are allocated to schools and colleges.


This text (titled Cost-Effectiveness Analysis in its previous editions) is the only full-length book to provide readers with the step-by-step methods they need to plan and implement a benefit-cost analysis in education. The authors examine a range of issues, including how to identify, measure, and distribute costs; how to measure effectiveness, utility, and benefits; and how to incorporate cost evaluations into the decision-making process. The updates to the Third Edition reflect the considerable methodological development in the evaluation literature, and the greater empiricism practiced by education researchers, to help readers learn to apply more advanced methods to their own analyses.

SAGE congratulates author Henry M. Levin, winner of the 2017 AERA Distinguished Contributions to Research in Education Award.
List of Tables, Figures, and Examples
Acknowledgments to the Second Edition
Acknowledgments to the Third Edition
About the Authors
Chapter 1. Introduction to Economic Evaluation
1.1. Purpose and Goals of the Book  
1.2. The Importance of Economic Evaluations  
1.3. Economic Evaluation for Decisionmaking in Education  
1.4. Summary of Approaches to Economic Evaluation  
1.5. Economic Evaluations and Policymaking  
1.6. Outline of the Book  
Discussion Questions  
Chapter 2. Establishing an Analytic Framework
2.1. Identifying the Problem  
2.2. Taking Account of the Audience and Perspective  
2.3. Relating Economic Evaluation to the Theory of Change  
2.4. Determining If Economic Evaluation Is Necessary  
2.5. Conclusions  
Discussion Questions  
Chapter 3. Cost Concepts
3.1. The Concept of Costs  
3.2. Cost per Unit  
3.3. Costs and the Theory of Change  
3.4. Costs Data and Budgetary Information  
3.5. Motivation for Cost Analysis  
3.6. Conclusions  
Discussion Questions  
Chapter 4. The Ingredients Method
4.1. Identifying Ingredients  
4.2. Specifying Ingredients  
4.3. Sources of Ingredients Information  
4.4. Conclusions  
Discussion Questions  
Chapter 5. Placing Values on Ingredients
5.1. Methods for Valuing Ingredients  
5.2. Placing Dollar Values on Ingredients  
5.3. Costs Over Multiple Years  
5.4. Conclusions  
Discussion Questions  
Chapter 6. Analyzing and Reporting Costs
6.1. Tabulating Total Cost Using a Cost Worksheet  
6.2. Reporting Costs  
6.3. Allocating Costs Among Constituencies  
6.4. Analyzing Cost Determinants and Generalizing Costs  
6.5. Conclusions  
Discussion Questions  
Chapter 7. Effectiveness
7.1. Specifying Effectiveness  
7.2. Methods for Identifying Effectiveness  
7.3. Utility Analysis  
7.4. Conclusions  
Discussion Questions  
Chapter 8. Cost-Effectiveness Analysis
8.1. Cost-Effectiveness Ratios  
8.2. Alternative Cost-Effectiveness Metrics  
8.3. Interpreting Cost-Effectiveness Ratios  
8.4. Explaining Cost-Effectiveness Ratios  
8.5. Evidence on Cost-Effective Interventions  
8.6. Conclusions  
Discussion Questions  
Chapter 9. Estimating Benefits
9.1. The Concept of Benefits  
9.2. Specifying Benefits  
9.3. Valuing Educational Benefits Through Earnings  
9.4. Valuing Educational Benefits Through Shadow Pricing  
9.5. Applying Benefits in Benefit-Cost Analysis  
9.6. Conclusions  
Discussion Questions  
Chapter 10. Benefit-Cost Analysis
10.1. Combining Benefits and Costs Into Economic Metrics  
10.2. Performing Benefit-Cost Analysis  
10.3. Examples of Benefit-Cost Analysis  
10.4. Conclusions  
Discussion Questions  
Chapter 11. Accounting for Uncertainty
11.1. Type of Uncertainty and Sensitivity  
11.2. General Sensitivity Testing  
11.3. Sensitivity Testing of Cost Estimates  
11.4. Sensitivity Testing of Cost-Effectiveness  
11.5. Sensitivity Testing of Benefit-Cost Analysis  
11.6. Distributional Issues  
11.7. Conclusions  
Discussion Questions  
Chapter 12. Checklist for Economic Evaluations
12.1. A Checklist for Appraising Economic Evaluations  
12.2. Appraising Economic Evaluations  
12.3. Conclusions  
Discussion Questions  
Chapter 13. Economic Evaluations for Education Policy
13.1. Applying Economic Analysis  
13.2. Expanding the Use of Economic Evaluation  
13.3. Decisionmaking and Economic Evaluation  
13.4. Prioritizing Educational Investments  
13.5. Using Economic Evaluations to Improve Education Research  
13.6. The Future of Economic Evaluation of Education  
13.7. A Final Word  
Discussion Questions  
Appendix A. Answers to Even-Numbered Exercises
Appendix B. CostOut Tool
Key features


  • A new Chapter 2 shows readers how to structure an economic analysis so that it is properly integrated with an impact evaluation and demonstrates how such an evaluation should be articulated to a theory of change.
  • Enhanced Chapters 3–6 now more clearly explain cost evaluation and provide an explicit separation between identifying ingredients and pricing them out.
  • A separate Chapter 7 sets out the preferred qualities of an effectiveness measure for the purposes of performing a cost-effectiveness analysis.
  • An enhanced Chapter 9 provides much more detail on estimating benefits.
  • A new Chapter 11 covers uncertainty and how to perform sensitivity testing.
  • A new Appendix B includes a discussion of a new tool—CostOut—for aiding researchers in performing harmonized and rigorous cost-effectiveness studies.


  • Coverage of the four major techniques of cost analysis include cost-feasibility, cost-effectiveness, cost-benefit, and cost-utility.
  • Detailed and varied examples from studies and articles ranging from education to public health introduce the principles and practice of cost-effectiveness analysis.
  • In-depth, chapter-ending exercises help readers hone their skills in evaluating policy options and program effectiveness.
  • Chapter-ending recommended readings and a comprehensive, end-of-book bibliography of methodological sources on cost analysis and educational cost studies facilitate further exploration of topics of interest.

Sample Materials & Chapters

Chapter 7

Chapter 10

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