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How Much Do Educational Outcomes Matter in OECD Countries?

  • Eric A. Hanushek
  • Ludger Woessmann

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 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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File URL: http://www.nber.org/papers/w16515.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16515.

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Date of creation: Nov 2010
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:16515
Note: ED EFG LS PE
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  1. Serge Coulombe & Jean-François Tremblay, 2004. "Literacy, Human Capital and Growth," Working Papers 0407E, University of Ottawa, Department of Economics.
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  11. 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.
  12. Cohen, Daniel & Soto, Marcelo, 2001. "Growth and Human Capital: Good Data, Good Results," CEPR Discussion Papers 3025, C.E.P.R. Discussion Papers.
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  16. repec:lan:wpaper:971 is not listed on IDEAS
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