Online education and inequality

Web-based teaching methods have been becoming increasingly popular and widespread lately. In the forefront are MOOCs, but one can think of any lecture or short video online, educational games, simulations, websites, quizzes, problem sets, etc. as part of a wide array of online tools that can help one learn.

But what is the effect of these new tools? Are they – for instance – crowding out “real-life” teachers from the market, or depress their wages? Or do they perhaps increase the gap between countries with low and high education levels?

Acemoglu, Laibson and List (2014) build a simple model of education to study this question. Imagine that there is a number of “islands” (or equivalently countries), each with its own students and teachers. Teachers can teach using a variety of tools/techniques. All students, and all teachers are homogeneous within an island (in terms of their human capital), but they are heterogeneous across islands. I.e. the model does not take into account educational inequalities within countries.

Each student has some human capital that she is endowed with, and the teachers increase this level using their human capital. It is assumed that if students on a particular island have the nth highest level of human capital across all islands, then teachers on the same island also have the nth highest level of human capital across all islands. I.e. if country X has the best teachers, it also has the best students; if country Y has the 2nd best students, it also has the 2nd best teachers, and so on.

In the pre-internet era, teachers can only teach on their own island. In the post-internet era, however, a subset of teachers (“superstar” teachers) in the country with the highest human capital will be able to teach all over the world. These superstars will only be able to teach everywhere in the world using certain teaching techniques. To be a little more concrete: the teachers can for instance record video lectures that can be watched by anyone, but personal/small group teaching techniques are still done by local teachers only.

A couple of things happen as a result of this. First, in the country with the highest human capital, nothing changes. Since the superstar teachers’ lectures can be watched everywhere, including this country, the number one country will still have the same stock of teachers. Other countries on the other hand now have access to the lectures of these superstar teachers that have higher human capital than their own teachers. This means that the tasks the superstars can perform (like lecturing) will not be done anymore by local teachers. Consequently, local teachers have more time to spend on other tasks.

Second, every country but the one with the highest human capital gains from human capital compared to the pre-internet era. This is simply because their local (less skilled) teachers are replaced by the superstars in certain tasks. Furthermore, countries with lower human capital gain more relative to the pre-internet era. This means that web-based education brings about a democratization of human capital across the world not only because everybody is catching up with the leader, but also because gaps between all other countries are decreasing.

Third, since the supply of teachers is not endogenized in the model, in poor countries there will be more teachers (the superstar ones, and the local ones). The local teachers will now concentrate only on those tasks that the superstars cannot perform (because they’re offline tasks). So the same number of local teachers will concentrate on a smaller number of tasks. This depresses the wages of local teachers. This is referred to as “crowding out”.

Fourth, counterbalancing the crowding out effect is the idea that superstar teachers push up the human capital levels in other countries (relative to pre-internet levels). This increases the marginal product of education in the given country. Since the authors assume competitive wage setting, this means that the wages of local teachers increase. This is called the complementarity effect. Intuitively, since the students learn more from the superstar teachers, in the end their human capital will be higher. But this means that teachers are sort of perceived as adding more value during the education process. This increases their wages. Another way of looking at it perhaps is that superstar teachers train students better in lectures for instance, and this allows local teachers to transfer their human capital more effectively in personal tutoring sessions.

So we see that as a result of web-based education, local teachers will concentrate on different tasks (in all countries but the best), and education levels across countries will be democratized. The question is what happens to teachers’ wages. Does the crowding out effect outweigh the complementarity effect, or vice versa?

The authors show that the wages of teachers increase overall if the skill level of teachers in a given country is not too high relative to the leader country. In a single country context, this could be interpreted as the worst teachers’ wages increasing, but mid-skill teachers’ wages decreasing. This is because low-skill teachers have much more to gain from the complementarity effect, so for them it will more easily surpass the crowding out effect.

Acemoglu, Laibson and List (2014) point out that there are key features missing in their deliberately simple model. One of which is that the supply of teachers is considered fixed. It could be interesting to see what happens in a dynamic model, where people can become teachers or choose some other occupation. Specifically, with the introduction of web-based education, the number of local people becoming teachers may decrease, and thus wages may not be depressed as much.

Another important missing feature is that students are not heterogeneous (i.e. they are all the same) within a country. I could see web-based education leading to larger inequality within countries if students are heterogeneous. For instance, suppose online education is merely an optional additional resource available to students (a realistic depiction for the moment). This can mean that only the most motivated students will take advantage of it. One may also think of language differences between countries. They may further exacerbate this, as it is more likely that the best students have better language skills, so they are anyways more suited to take online courses. The best students taking online courses can of course widen the gap between them and the other students.

My verdict is that for the time being, online education probably raises inequality within a given country, but by this it might very well increase average education levels in poorer countries, and as such can (for now marginally) contribute to the democratization of education levels around the world. As for teachers’ wages, demand for private tutors may drop as a result of online education in some countries. But I do not think full-time teachers will be affected in the foreseeable future.

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