A brief analysis of the economic results of restricting access to higher education through the application of a unified admission exam, from the perspective of 12 Latin American countries

1. UNIFIED EXAMS AS
A RESTRICTION TO
HIGHER
EDUCATION IN
LATIN AMERICA
Public Economics, 2017
ABSTRACT
Restricting access to higher education through a
unified, required entry exam is a polemic measure. Is
it socially just? Is it socially efficient?
Emilio José Calle
HOPKINS AAP

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Contents
ARTICLE .........................................................................................................................................................2
BACKGROUND OF THE ADMISSION EXAMS..................................................................................................2
ECONOMIC THEORETICAL FRAMEWORK......................................................................................................3
DATA GENERATING PROCESS........................................................................................................................3
ANALYSYS......................................................................................................................................................4
a. First Question........................................................................................................................................4
b. Second Question...................................................................................................................................4
c. Question 3 .............................................................................................................................................5
d. Question 4.............................................................................................................................................6
e. Question 5.............................................................................................................................................7
CONCLUSION.................................................................................................................................................8

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ARTICLE
The article found as an annex to this project is titled “Guillermo Lasso threatens to eliminate Senescyt if
he wins the 2017 elections” (free translation). Basically there were elections in Ecuador at the beginning
of this year, and the main opposition candidate was Guillermo Lasso. Amongst his proposals was the idea
to eliminate Senescyt, the agency that rules over higher education in Ecuador.
As per full disclosure, I must point out that I’m a scholarship recipient of Senescyt and that allowed me to
attend Hopkins. However that is not what Mr. Lasso wanted to eliminate: he wanted to eliminate the
ENES exam that is required for all high school graduates in Ecuador to access higher educational
institutions, in particular those funded by the State.
Mr. Lasso’s idea was to appeal to young voters, as in Ecuador it’s possible to voluntarily vote since age 16,
and mandatory from 18 on. Mr. Lasso’s reasoning was that “young people in Ecuador should be able to
freely choose any career they so desire”….and that the State should pay for it apparently. It’s important
to point out that, in spite of Mr. Lasso being a banking millionaire, he has absolutely no higher education
of any kind. In spite of that, he was minister of Economics of Ecuador 20 years ago, which is something
that would make any economic professional cringe. Not surprisingly, Mr. Lasso only lasted 1 month in that
position.
At the end Mr. Lasso badly lost the election to the incumbent candidate (the former vice president of
Ecuador), and in part it was due to the fact that people in Ecuador do recognize that this government has
acted correctly in regards to Education, making it fairer through merit and not through unnecessary and
ill-advised admission criterion that only resulted in people spending many years in college on the State’s
dime, and obtaining degrees that had no marketability in Ecuador.
BACKGROUND OF THE ADMISSION EXAMS
At the end of the 70s, Latin America was in a new financial crisis. After several years and even decades of
growing their economies through heavy commodity exports, the governments of pretty much all Latin
American countries needed help, that came from several sources including the IMF. One of the
recommendations of the IMF was precisely to cut back on education, which had gotten out of hand in the
times of plenty through the construction and funding of all types of educational institutions, including
higher education institution (colleges and universities). These institutions got bloated, became
strongholds of syndicates and unions, and drained money from the governments with dubious results in
regards to forming professionals that would contribute to society.
In the 80’s, some of the countries in Latin America did follow the advice of the IMF and restricted access
to higher education both through an exam and offering what were considered to be socially beneficial
careers, while others decided not to follow said advice. That created an obvious divide that will be the
center of this paper: the performance of the countries on both groups since 1980 to 2016.

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ECONOMIC THEORETICAL FRAMEWORK
According to the Spencer Signaling Model, education (of any level but mostly higher education) should be
inexpensive for those of higher skills and more expensive (sometimes unreachable) for those of lower skill
sets. Also, it’s expected that those skills will be transferable: those with higher skills will get better school
results (signal) which in turn will mean that they will be better professionals (more production/
productivity). This happens because education will be “easier” for those of higher skill sets: they will learn
faster, better, reach higher goals, and maybe get scholarships and support. But if a person with low skills
manages to signal having high skills and gets hired, then this person will have lower productivity and will
probably be a loss for the company/country.
On the other hand, education has been demonstrated to be one of the best tools for the development of
a person, and for income mobility. Restricting access to higher education could be highly detrimental for
those who aspire to ascent socially. However, when the State pays for the education of a person who has
no potential for what he is doing, this implies inefficiency at a macro level, and a social loss. This conflict
is the center of this research.
DATA GENERATING PROCESS
As mentioned before, this paper pits the performance of two groups of Latin American countries based
on how open their access to higher education is: Restricted vs. Unrestricted. 12 countries have been
analyzed and sorted as seen below:
RESTRICTED UNRESTRICTED
Chile Argentina
Colombia Venezuela
Ecuador Bolivia
Mexico Peru
Brazil Paraguay
Cuba Uruguay
And they have been analyzed based on 4 variables: GDP, GDP per capita, Gini Index as a signal to social
fairness in the country, and Human Capital Index as a measure of how much education exists in the
country as individual educational indexes (especially those specific to higher education) were hard to
come by. So Human Capital is being used instead as a proxy. Human Capital comes from “The Human
Capital Report” from the World Economic Forum. Everything else comes mostly from the Federal Reserve
Economic Data (FRED).
It’s worth mentioning that Cuba was particularly hard to come by in terms of Human Capital, for reasons
that are obvious. Yet most reports found tied Cuba’s Human Capital to Chile, so this report duplicated
Chile’s Human Capital index in the case of Cuba. In spite of the bad economic situation of Cuba, it’s
considered that doing this actually lowers the results for Cuba, based mostly on how many Chilean
students go to Cuba for education, mostly in medical and biochemical sciences.

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ANALYSYS
a. First Question
The first question that needs to be answered is whether restricting access to higher education actually
increases the economic performance of a country, which is calculated using it’s production evolution in
this case it’s GDP. The results can be seen below:
RESTRICTED UNRESTRICTED DIFFERENCE
Chile Argentina
375% 101% 273%
Colombia Venezuela
245% 95% 151%
Ecuador Bolivia
195% 179% 16%
Mexico Peru
133% 188% -55%
Brasil Paraguay
131% 237% -106%
Cuba Uruguay
287% 123% 164%
TOTAL DIFFERENCE 443%
AVERAGE GROWTH DIFFERENCE
228% 154% 74%
AVERAGE ANNUAL GROWTH DIFFERENCE
6.32% 4.27% 2.05%
It’s important that this analysis was done both longitudinally and vertically. First relatively similar
countries (size, population, etc), were paired to see if the difference in higher education access made a
difference. As can be seen, it does. As expected, those countries with restricted access to education have
had a better economic performance that those who don’t by a margin of 4 to 2, and on average the annual
growth in the 36 years analyzed was 6.32% against a 4.27% rhythm for those unrestricted, or about 2.05%
extra growth per year.
b. Second Question
The second question that would need to be answered is whether restricting access to higher education
has made countries less fair, less “socially just” in the time period studied. This will be measured using the
Gini index. In this index, the closer a country is to 0, the less unequal (more equal) its society is. The
expectation is that unrestricted counties will have lower Gini indexes showing more fairness. The results
are shown below:

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RESTRICTED UNRESTRICTED DIFFERENCE
Chile Argentina
50.45 42.67 7.78
Colombia Venezuela
53.5 46.94 6.56
Ecuador Bolivia
45.38 48.4 -3.02
Mexico Peru
48.21 44.14 4.07
Brazil Paraguay
51.48 51.67 -0.19
Cuba Uruguay
50 41.6 8.4
TOTAL DIFFERENCE 23.6
AVERAGE DIFFERENCE
49.84 45.90 3.93
As expected, the Unrestricted countries are indeed considered to be “fairer”, being closer to 0 by a margin
of 3.93, so it could be said that the societies in those countries are on average 3.93% fairer. It’s important
to point out that Ecuador breaks that mold beating Bolivia in this index. Ecuador and Bolivia have had
similar governments in the past 10 years, with the same president, no coups of State, and the same “XXI
century socialism” ideology. Yet Ecuador has always being considered to be more progressive that is why
in spite of being much smaller than Bolivia, Ecuador has a greater population and faster economic growth
in general terms. The prior here was that Bolivia was going to be more equal, as economic theory would
predict that inequality in a country would increase as GDP grows faster (the richest earn more as returns
on capital increase). Yet Ecuador has managed to maintain societal equality somehow, being the lowest
Gini index of all Restricted Countries.
c. Question 3
On the a 3rd
topic, it would be important to analyze whether restricting access to higher education has
had a significant impact on increasing the Human Capital of the countries analyzed. The prior expectation
would be that it does so Restricted countries should show greater Human Capital indices that those
Unrestricted. The results of this comparison is shown below:

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RESTRICTED UNRESTRICTED DIFFERENCE
Chile Argentina
3.051868916 2.945662737 0.10620618
Colombia Venezuela
2.486372709 2.719714403 -0.23334169
Ecuador Bolivia
2.730400085 2.82598877 -0.09558868
Mexico Peru
2.676778793 2.750411749 -0.07363296
Brazil Paraguay
2.748221636 2.513940096 0.23428154
Cuba Uruguay
3.051868916 2.665006876 0.38686204
TOTAL DIFFERENCE 0.32478642
AVERAGE DIFFERENCE
2.79 2.74 0.05
The results here are surprising: even though Human Capital is indeed higher in the Restricted countries,
it is so by a very low margin, basically negligible. This is basically unexpected especially when the results
of the regressions shown in the following sections are shown.
d. Question 4
Does GDP performance by itself show greater social benefit? One way of looking at this question is to
analyze the GDP per capita growth that have taken place on the countries analyzed in this period. These
results are:
RESTRICTED UNRESTRICTED DIFFERENCE
Chile Argentina
$ 14,660.51 $ 10,501.66 $ 4,158.85
Colombia Venezuela
$ 7,447.88 $ 13,750.21 $ (6,302.33)
Ecuador Bolivia
$ 5,366.55 $ 2,392.77 $ 2,973.78
Mexico Peru
$ 9,510.60 $ 5,934.55 $ 3,576.05
Brazil Paraguay
$ 11,211.89 $ 3,822.86 $ 7,389.03
Cuba Uruguay
$ 6,156.62 $ 13,943.90 $ (7,787.29)
TOTAL DIFERENCE $ 4,008.09
AVERAGE DIFFERENCE
9059.01 8390.99 668.01 7.37%

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Again the results do support the prior expectation: GDP per capita is not only higher in those countries
with restricted Higher Education, it has actually grown much faster in this 36 years as can be seen below:
RESTRICTED UNRESTRICTED DIFFERENCE
Chile Argentina
197% 30% 167%
Colombia Venezuela
98% -3% 101%
Ecuador Bolivia
46% 1.03885831 45%
Mexico Peru
27% 59% -32%
Brazil Paraguay
36% 61% -26%
Cuba Uruguay
102% 90% 12%
TOTAL DIFERENCE 268%
AVERAGE DIFFERENCE
84% 57% 27%
e. Question 5
Does restricted higher education cause higher GDP growth through an increase in Human Capital? So far
all the data shown points towards a yes answer, yet Human Capital itself does not seem to be so different
from one country to the other. To answer this question it would be better to apply a stronger statistical
tool such as a regression analysis. Also, as nominal numbers have very different ways to be measured,
comparing them directly in panel would create bias in any model. Thus to eliminate such situation, the
data has been transformed in logs and applied in the form of a regression.
The results shown below are basically those that correspond to all the countries analyzed in relation to
their GDP and Human Capital with the aim of finding Granger causation through the f-statistic:
RESTRICTED UNRESTRICTED
Chile Argentina
R-Square 0.96642633 0.877703438
Adjusted R-square 0.96543887 0.87410648
Colombia Venezuela
R-Square 0.97903117 0.903367926
Adjusted R-square 0.97841444 0.900525806
Ecuador Bolivia
R-Square 0.94319469 0.89032926
Adjusted R-square 0.94152394 0.88710365
Mexico Peru
R-Square 0.96069802 0.645644937
Adjusted R-square 0.95954208 0.63522273
Brasil Paraguay

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R-Square 0.98419668 0.940602661
Adjusted R-square 0.98373187 0.93885568
Cuba Uruguay
R-Square 0.82545092 0.817554113
Adjusted R-square 0.82031713 0.812188057
GROUP AVERAGE
R-Square 0.943166302 0.845867056
Adjusted R-square 0.941494722 0.841333734
CONCLUSION
This paper has reinforced the suspicion that a restricted higher education through a unified admission
exam does provide significant economic benefits on the long run for the countries that implement it. It
also follows the logic exposed by Spencer’s idea both on the cost of education (being more efficient, the
States can provide more and better education to those who have the greatest skills); and higher returns
to society through more productive professionals.
However, the data also points towards more inequality generated out of this system. Providing easier
access to higher education to those who by natural abilities or by inherited traits already had better
chances in life can be perceived as politically unfair. While de Gini coefficients provide a small distance,
an almost 4% difference in fairness can include millions of people like in a country such as Mexico, where
it could mean that as many as 4 million Mexicans have to put up with a system that is not helping them
get ahead.
Nonetheless there is another side to this coin: when measured as GDP per capita, the Restricted countries
overtake the Unrestricted by a great margin, both on spot terms as in growth terms. Measuring society’s
welfare as a function of the income each individual is getting gives a definitive advantage to the Restricted
system, while seeming to point towards making this the way higher education should work in Latin
America.
Answering the questions proposed in the abstract, are unified exams socially desirable? As mentioned
apparently the answer is yes, at least in these countries of Latin America, as shown by the strong
regression results from the last section. Whether is socially just remains ambiguous: the equality gap could
be caused by the restriction in higher education, but could also be caused indirectly by its result: faster
growing countries will have higher inequality gaps, that’s a given. Maybe the almost 4% inequality is not
really a unfairness in the system per se, just the result of a transmission mechanism of higher production
into higher income.
Finally it’s important to keep in mind that this is not a comparison between education or lack of education;
it’s more a comparison on how efficient is said education. In that sense, the advantage of restricted versus
unrestricted seem to corroborate the expectations priors.

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Sábado, 25 Junio 2016 13:45 POLITIKO 2017 Visitas: 27667
Guillermo Lasso amenaza con eliminar la Senescyt si gana las elecciones de 2017
Guillermo Lasso participó de un evento en salón de eventos de un exclusivo centro comercial de
Cumbayá, nororiente de Quito. Foto: Miguel Jiménez/El Telégrafo Redacción Política
Desde el salón de eventos de un exclusivo centro comercial de Cumbayá, nororiente de Quito, Guillermo
Lasso, precandidato presidencial de CREO, arremetió contra el sistema universitario actual asegurando
que en caso de ganar las elecciones de 2017 eliminaría la Secretaría Nacional de Educación Superior
(Senescyt). El banquero hizo varias promesas como parte de su anticipada campaña electoral. Entre sus
planes están una “contrareforma tributaria” para eliminar $ 3 mil millones en impuestos; eliminación del
Impuesto a los Consumos Especiales (ICE) para las importaciones de cocinas a gas; derogación de la
Ley de Comunicación. Afirmó que si alcanza el sillón presidencial, no elevaría el precio del gas licuado
de petróleo (GLP). Sus expresiones se dieron dentro de una convención de su movimiento político. En
menos de 50 minutos, Lasso despotricó contra las políticas emprendidas por Gobierno Nacional. El
precandidato de CREO informó que para las elecciones del 17 de febrero del próximo año formará su
propia veeduría ciudadana con unos 50.000 colaboradores que serán distribuidos en las juntas
receptoras del voto. No precisó cuándo se desarrollarán las elecciones primarias del movimiento para
elegir a los candidatos para asambleístas, presidente y vicepresidente de la república, proceso dispuesto
por el Código de la Democracia. Sobre las posibles candidaturas de Jaime Nebot, Alberto Dahik y otras
figuras políticas, respondió que aquello no le preocupa. Lasso presentará en las próximas semanas su
plan de trabajo. (I)
Esta noticia ha sido publicada originalmente por Diario EL TELÉGRAFO bajo la siguiente
dirección: http://www.eltelegrafo.com.ec/noticias/politiko-2017/49/guillermo-lasso-amenaza-con-eliminar-
la-senescyt-si-gana-las-elecciones-de-2017
Si va a hacer uso de la misma, por favor, cite nuestra fuente y coloque un enlace hacia la nota
original. www.eltelegrafo.com.ec