Cost-Effectiveness Analysis in Education
Welcome to this resource for improving efficiency in education. Cost-effectiveness analysis is a versatile tool for maximizing outcomes within budget constraints.
For CEA Studies
חומרי קריאה לתלמידי מחקר
Why is CEA in Education Critical?
The education sector is the second largest sector in the United States in terms of national resource utilization, second only to the healthcare sector. The public cost alone in the U.S. education sector amounts to approximately one trillion dollars.
Despite criticism of resource waste, the investigation into the most effective educational practices has been extremely limited. Assertions about effectiveness without considering costs are partial and misleading for budget-constrained policymakers.
$1T
Annual Public Budget
Massive investment in the U.S. education sector
#2
Largest National Sector
Second only to the healthcare sector
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Basic Methodology: The Ingredients Method
The Ingredients Method, developed by Levin in the 1970s, forms the core of cost analysis in education. This conceptual framework is based on the principle of opportunity cost – the value of a resource in its best alternative use.
01
Identification of Resource Components
Precise detailing of personnel, facilities, equipment, materials, and transportation in specific quantities and qualities
02
Determining Costs
Using market prices or shadow prices to determine the opportunity cost of each component
03
Calculation of Costs
Determining the total cost and the average cost per participant in the program
04
Analysis of Cost Burden
Determining who bears the burden – governmental bodies, families, or private organizations
Key Economic Principles
Opportunity Cost
Opportunity Cost is at the core of the conceptual framework – it is the value of a resource in its best alternative use. This approach allows for the determination of the true cost of resource allocation decisions.
Market Prices and Shadow Prices
When an observed price is distorted relative to the opportunity cost, or when no market exists at all (e.g., institution-owned building, volunteer time), shadow prices should be used to approximate the value in a competitive market.

Social Perspective: All resources must be included, regardless of who funds them (government, families, organizations), to reflect the true social cost of the intervention.
Resources and Technical Assistance
Online Modules
A series of 5 free modules explaining how to conduct cost analysis and CEA, including an updated module on reporting. Developed by the CAP Project.
Decision Flowchart
A guiding video that helps determine which type of economic evaluation is appropriate for your specific research questions.
Cost Tool Kit
A free Excel-based tool that allows you to input data, calculate costs, adjust for inflation, and compute CEA ratios.
For additional technical support, especially for IES grants, you can contact CAP Project experts at: [email protected]
Practical Application: Improving Early Literacy
Research examined seven effective reading programs for students from kindergarten to third grade, such as K-PALS and Reading Recovery, comparing their cost-effectiveness ratios.
Significant Variation in Outcomes
The cost-effectiveness ratios for improving one standard deviation in alphabetic skills showed a huge disparity among the different programs.
  • K-PALS - $38 at standard implementation level
  • Corrective Reading - $38,135 for the same outcome
  • Comparison Challenges: Differences in target populations, intervention duration, and inconsistent metrics
Case Study: Increasing High School Graduation Rates
A study compared five interventions aimed at improving high school graduation rates, including Talent Search for in-school students versus Job Corps for dropouts. The findings demonstrated the importance of site-specific analysis.
1
Talent Search
$30,520 per additional graduate
Supplementary program
2
Job Corps
Moderate cost
Program for dropouts
3
New Chance
$194,640 per additional graduate
Program for young mothers

Site-level variation: A global analysis is not precise. For Talent Search, the cost per additional graduate at different sites ranged from $10,330 to $131,930, emphasizing the need for location-specific analysis.
Recommendations for Rigorous Implementation
Simultaneous Data Collection
It is mandatory to collect cost and effectiveness data simultaneously. Retrospective collection is very limited, especially for the control group.
Comparability
Work with shared goals, similar metrics, and comparable populations. It is not possible to fundamentally compare different metrics.
Sensitivity Analysis
Extensive tests for the impact of changes in assumptions on CEA ratios to examine the stability of rankings.
Recommendations for Policy and Training
Investment in Training
There is a need to invest in training educational evaluators in economic concepts and measurements. There is a significant lack of training in this field in academia, unlike in public health.
Differentiating Prices
Use local prices for specific decisions, versus national averages for broader general comparison.
Collaboration
Direct collaboration with policymakers to ensure the relevance and utility of CEA for their practical needs.
Learning from Other Fields
Health sciences have developed more advanced methodologies in sensitivity analysis and statistical testing around CEA that can be learned from.
CEA vs. CBA
CEA is preferred in education because outcomes (achievements, attitudes, behavior) are not easily quantifiable financially, and are more suitable for measurement in effectiveness units.
The Way Forward
Concluding Analogy
CEA is like a precise roadmap. Instead of choosing a program that seems "fastest" or "cheapest," CEA allows you to choose the path that leads you to your destination (educational achievements) with the most efficient use of fuel (resources).
Defining Clear Goals
Measurable educational outcomes
Systematic Analysis
Examination of all resources and costs
Informed Decisions
Selecting the optimal strategy
Cost-effectiveness analysis in education is not merely a technical tool – it is a conceptual framework that enables informed decision-making in the allocation of limited resources. Considering the winding roads (implementation challenges) and unexpected obstacles (hidden costs), rigorous CEA is the key to maximizing educational impact.
CEA Research Group קבוצת מחקר
Limor Eylon
Doctoral student (Ph.D. candidate) in the Department of Special Education at Bar-Ilan University
Limor is a doctoral student (Ph.D. candidate) in the Department of Special Education at Bar-Ilan University, specializing in Cognitive Diversity (Intellectual Disability). She holds a Bachelor's degree in Special Education and Hebrew Literature, a Master's degree in Special Education, and an additional Master's degree in Intellectual Disability from Bar-Ilan University. She currently works as an expert at the "Matya" (Regional Support Center) in Holon, where she leads training sessions for teaching and educational teams on the inclusion of diverse students with special needs in general education settings.
Her doctoral research examines the impact of Post-Secondary Education (PSE) programs on adaptive behavior, cognition, psychological capital, and employment outcomes among students with intellectual disabilities, employing a Cost-Effectiveness Analysis (CEA). Through this research, she evaluates the long-term economic and social value specifically provided by these academic education programs in Israel for individuals with intellectual disability.
Yael Rothschild Shiff, CPA
MA Student in Educational Systems Management (TAU)
Yael Rothschild Shiff is a current MA student in Educational Systems Management at Tel Aviv University. She is a finance and business development professional with an academic background in economics and accounting. She holds an MBA in Finance from New York University (NYU), where she also served as a Teaching Fellow in strategy and negotiations. She holds a B.A. in Economics and Accounting from Tel Aviv University and is a licensed CPA in both Israel and the USA. Her professional experience includes providing economic and strategic consulting services, conducting economic analysis, ROI modeling, and valuations. Yael's expertise spans strategic international transactions and M&As, gained through her roles in private consulting and as International Business Development Director at Teva Pharmaceutical. She also held Education and Teaching positions at the Ministry of Education, reinforcing her practical experience in the education sector.
Yifat Betser-Nahum
Researcher in education policy, teacher preparation, and professional learning
Dr. Sharon Malki-Levy
Researcher in Language Policy and Educational Effectiveness
Forum on the Economic Aspects of Education Policy
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