Cross-country differences in the quality of schooling

This paper constructs a cross-country measure of the quality of education using a novel approach based on international test scores data. The first main finding is that there are large differences in education quality – one year of schooling in the U.S. is equivalent to three or more years of schooling in a number of low-income countries. I incorporate the estimated series for schooling quality in an accounting framework calibrated using evidence on Mincerian returns. This leads to the second important finding, which is that the fraction of income differences explained by the model rises substantially when one includes education quality; the increase is around 22percentage points.