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The Role of Cognitive Skills in Economic Development

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  • Eric Hanushek

    () (Hoover Institute, Stanford University)

  • Ludger Woessmann

    () (University of Munich)

Abstract

The role of improved schooling, a central part of most development strategies, has become controversial because expansion of school attainment has not guaranteed improved economic conditions. This paper reviews the role of cognitive skills in promoting economic well-being, with a particular focus on the role of school quality and quantity. It concludes that there is strong evidence that the cognitive skills of the population – rather than mere school attainment – are powerfully related to individual earnings, to the distribution of income, and to economic growth. New empirical results show the importance of both minimal and high level skills, the complementarity of skills and quality of economic institutions, and robustness of the relationship between skills and growth. International comparisons incorporating expanded data on cognitive skills reveal much larger skill deficits in developing countries than generally derived from just school enrollment and attainment. The magnitude of change needed makes clear that closing the economic gap with developed countries will require major structural changes in schooling institutions.

Suggested Citation

  • Eric Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Discussion Papers 07-034, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:07-034
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    Keywords

    cognitive skills; school systems; economic growth; school attainment;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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