How much do Educational Outcomes Matter in OECD Countries?
AbstractExisting growth research provides little explanation for the very large differences in long-run growth performance across OECD countries. We show that cognitive skills can account for growth differences within the OECD, whereas a range of economic institutions and quantitative measures of tertiary education cannot. Under the growth model estimates and plausible projection parameters, school improvements falling within currently observed performance levels yield very large gains. The present value of OECD aggregate gains through 2090 could be as much as $275 trillion, or 13.8 percent of the discounted value of future GDP. Extensive sensitivity analyses indicate that, while differences between model frameworks and alternative parameter choices make a difference, the economic impact of improved educational outcomes remains enormous. Interestingly, the quantitative difference between an endogenous and neoclassical model framework – with improved skills affecting the long-run growth rate versus just the steady-state income level – matters less than academic discussions suggest. We close by discussing evidence on which education policy reforms may be able to bring about the simulated improvements in educational outcomes.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3238.
Date of creation: 2010
Date of revision:
education; growth; OECD; cognitive skills; projection;
Other versions of this item:
- Eric A. Hanushek & Ludger Woessmann, 2011. "How much do educational outcomes matter in OECD countries?," Economic Policy, CEPR & CES & MSH, vol. 26(67), pages 427-491, 07.
- Hanushek, Eric A. & Woessmann, Ludger, 2010. "How Much Do Educational Outcomes Matter in OECD Countries?," IZA Discussion Papers 5401, Institute for the Study of Labor (IZA).
- Eric A. Hanushek & Ludger Woessmann, 2010. "How Much Do Educational Outcomes Matter in OECD Countries?," NBER Working Papers 16515, National Bureau of Economic Research, Inc.
- I20 - Health, Education, and Welfare - - Education - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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