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How much do educational outcomes matter in OECD countries?

  • Hanushek, Eric A.
  • Wößmann, Ludger

Existing 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\% of the discounted value of future GDP for plausible policy changes. Extensive sensitivity analyses indicate that, while different 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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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20416.

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Date of creation: 2011
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Publication status: Published in Economic Policy 67 26(2011): pp. 427-491
Handle: RePEc:lmu:muenar:20416
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  1. Antonio Ciccone & Elias Papaioannou, 2005. "Human capital, the structure of production and growth," Economics Working Papers 902, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Serge Coulombe & Jean-François Tremblay, 2004. "Literacy, Human Capital and Growth," Working Papers 0407E, University of Ottawa, Department of Economics.
  3. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2009. "The effect of employment protection legislation and financial market imperfections on investment: Evidence from a firm-level panel of EU countries," Banco de Espa�a Working Papers 0914, Banco de Espa�a.
  4. Bradley, Steve & Taylor, Jim, 2002. "The Effect of the Quasi-market on the Efficiency-Equity Trade-Off in the Secondary School Sector," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 295-314, July.
  5. Thomas Dee & Brian Jacob, 2009. "The Impact of No Child Left Behind on Student Achievement," NBER Working Papers 15531, National Bureau of Economic Research, Inc.
  6. Flavio Cunha & James J. Heckman & Lance Lochner & Dimitriy V. Masterov, 2005. "Interpreting the Evidence on Life Cycle Skill Formation," NBER Working Papers 11331, National Bureau of Economic Research, Inc.
  7. Adele Atkinson & Simon Burgess & Bronwyn Croxson & Paul Gregg, 2004. "Evaluating the Impact of Performance-related Pay for Teachers in England," The Centre for Market and Public Organisation 04/113, Department of Economics, University of Bristol, UK.
  8. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  9. repec:lan:wpaper:971 is not listed on IDEAS
  10. Robert J. Barro & Jong-Wha Lee, 2010. "A New Data Set of Educational Attainment in the World, 1950-2010," NBER Working Papers 15902, National Bureau of Economic Research, Inc.
  11. Philippe Aghion & Mathias Dewatripont & Caroline Hoxby & Andreu Mas-Colell & André Sapir, 2010. "The governance and performance of universities: Evidence from Europe and the US," ULB Institutional Repository 2013/167268, ULB -- Universite Libre de Bruxelles.
  12. Booker, Kevin & Gilpatric, Scott M. & Gronberg, Timothy & Jansen, Dennis, 2007. "The impact of charter school attendance on student performance," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 849-876, June.
  13. Atila Abdulkadiroğlu & Joshua D. Angrist & Susan M. Dynarski & Thomas J. Kane & Parag A. Pathak, 2011. "Accountability and Flexibility in Public Schools: Evidence from Boston's Charters And Pilots," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 699-748.
  14. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
  15. Eric Eide, 2004. "The Teacher Labour Market and Teacher Quality," Oxford Review of Economic Policy, Oxford University Press, vol. 20(2), pages 230-244, Summer.
  16. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
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