Data from the 1985-86 Peru Living Standards Survey were used to analyze the targeting of public education expenditures and the effects on enrollment of public school fees and reduced travel time to secondary schools. This chapter also focuses on strengths and weaknesses of using either an estimation-based measure of benefit or a nonestimation-based approach (benefit-incidence analysis) to assess household willingness to pay for education. Educational benefits were found to be mildly pro-poor in Peru. However, a much lower proportion of poor children aged 6-12 were enrolled in elementary schools compared to other income groups. Females as a group received fewer expenditures than males as a result of differential enrollment rates. Elementary education benefits were higher in rural than urban areas, while the reverse was true at secondary and higher levels, in part because rural teenagers were more likely to be enrolled in elementary school. Also, a large fraction of poor teenagers overall were enrolled in elementary school. Out-of-pocket expenses such as uniforms were a barrier to participation for children in low-income households. Increasing school fees would be regressive as a percentage of household income, although the largest absolute losses would fall on middle-income households. Analysis of willingness to pay higher fees for better proximity to schools found that, although many rural households lived far from the nearest secondary school, the potential reduction in travel expenses would fall far short of the increased cost of schooling. However, the analysis neglected potential nonfinancial benefits of improved school proximity. Contains 49 references. (SV)