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Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation

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Author Info
Eric A. Hanushek
Ludger Woessmann

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Abstract

We provide evidence that the robust association between cognitive skills and economic growth reflects a causal effect of cognitive skills and supports the economic benefits of effective school policy. We develop a new common metric that allows tracking student achievement across countries, over time, and along the within-country distribution. Extensive sensitivity analyses of cross-country growth regressions generate remarkably stable results across specifications, time periods, and country samples. In addressing causality, we find, first, significant growth effects of cognitive skills when instrumented by institutional features of school systems. Second, home-country cognitive-skill levels strongly affect the earnings of immigrants on the U.S. labor market in a difference-in-differences model that compares home-educated to U.S.-educated immigrants from the same country of origin. Third, countries that improved their cognitive skills over time experienced relative increases in their growth paths. From a policy perspective, the shares of basic literates and high performers have independent significant effects on growth that are complementary to each other, and the high-performer effect is larger in poorer countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14633.

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Date of creation: Jan 2009
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Handle: RePEc:nbr:nberwo:14633

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Find related papers by JEL classification:
H4 - Public Economics - - Publicly Provided Goods
I2 - Health, Education, and Welfare - - Education
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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