Skip to main content

Advertisement

SpringerLink
Log in

Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation

  • Published:
Journal of Economic Growth Aims and scope Submit manuscript

Abstract

We develop a new metric for the distribution of educational achievement across countries that can further track the cognitive skill distribution within countries and over time. Cross-country growth regressions generate a close relationship between educational achievement and GDP growth that is remarkably stable across extensive sensitivity analyses of specification, time period, and country samples. In a series of now-common microeconometric approaches for addressing causality, we narrow the range of plausible interpretations of this strong cognitive skills-growth relationship. These alternative estimation approaches, including instrumental variables, difference-in-differences among immigrants on the U.S. labor market, and longitudinal analysis of changes in cognitive skills and in growth rates, leave the stylized fact of a strong impact of cognitive skills unchanged. Moreover, the results indicate that school policy can be an important instrument to spur growth. The shares of basic literates and high performers have independent relationships with growth, the latter being larger in poorer countries.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acemoglu D., Johnson S., Robinson A. R. (2001) The colonial origins of comparative development: An empirical investigation. American Economic Review 91(5): 1369–1401

    Article  Google Scholar 

  • Acemoglu D., Johnson S., Robinson A. R. (2005) Institutions as a fundamental cause of long-run growth. In: Aghion P., Durlauf S. N. (eds) Handbook of economic growth. North Holland, Amsterdam, pp 385–472

    Chapter  Google Scholar 

  • Aghion P., Howitt P. (1998) Endogenous growth theory. MIT Press, Cambridge, MA

    Google Scholar 

  • Aghion, P., Boustan, L., Hoxby, C. M., & Vandenbussche, J. (2009). The causal impact of education on economic growth: Evidence from the U.S. (mimeo) Department of Economics: Harvard University (March).

  • Andrews D. R., Moreira M. J., Stock J. H. (2007) Performance of conditional Wald tests in IV regression with weak instruments. Journal of Econometrics 139(1): 116–132

    Article  Google Scholar 

  • Appleton S., Atherton P., Bleaney M. (2011) Growth regressions and data revisions in Penn World Tables. Journal of Economic Studies 38(3): 301–312

    Article  Google Scholar 

  • Autor D. H., Katz L. F., Kearney M. S. (2006) The polarization of the U.S. labor market. American Economic Review 96(2): 189–194

    Article  Google Scholar 

  • Autor D. H., Katz L. F., Kearney M. S. (2008) Trends in U.S. wage inequality: Revising the revisionists. Review of Economics and Statistics 90(2): 300–323

    Article  Google Scholar 

  • Barro R. J. (1991) Economic growth in a cross section of countries. Quarterly Journal of Economics 106(2): 407–443

    Article  Google Scholar 

  • Barro R. J. (1997) Determinants of economic growth: A cross-country empirical study. MIT Press, Cambridge, MA

    Google Scholar 

  • Barro R. J. (2001) Human capital and growth. American Economic Review 91(2): 12–17

    Article  Google Scholar 

  • Barro R. J., Lee J.-W. (1993) International comparisons of educational attainment. Journal of Monetary Economics 32(3): 363–394

    Article  Google Scholar 

  • Barro, R. J., & Lee, J.-W. (2010). A new data set of educational attainment in the world, 1950-2010. NBER Working Paper 15902. Cambridge, MA: National Bureau of Economic Research (April).

  • Barro R. J., McCleary R. M. (2003) Religion and economic growth across countries. American Sociological Review 68(5): 760–781

    Article  Google Scholar 

  • Barro R. J., Ursúa José F. (2008) Macroeconomic crises since 1870. Brookings Papers on Economic Activity 1: 336–350

    Google Scholar 

  • Bils M., Klenow P. J. (2000) Does schooling cause growth?. American Economic Review 90(5): 1160–1183

    Article  Google Scholar 

  • Bishop J. H. (2006) Drinking from the fountain of knowledge: Student incentive to study and learn—Externalities, information problems, and peer pressure. In: Hanushek E. A., Welch F. (eds) Handbook of the Economics of Education. North Holland, Amsterdam, pp 909–944

    Chapter  Google Scholar 

  • Bowles S., Gintis H., Osborne M. (2001) The determinants of earnings: A behavioral approach. Journal of Economic Literature 39(4): 1137–1176

    Article  Google Scholar 

  • Castelló A., Doménech R. (2002) Human capital inequality and economic growth: Some new evidence. Economic Journal 112(478): C187–C200

    Article  Google Scholar 

  • Ciccone A., Jarocinski M. (2010) Determinants of economic growth: Will data tell?. American Economic Journal: Macroeconomics 2(4): 222–246

    Article  Google Scholar 

  • Ciccone A., Papaioannou E. (2009) Human capital, the structure of production, and growth. Review of Economics and Statistics 91(1): 66–82

    Article  Google Scholar 

  • Cingano F., Leonardi M., Messina J., Pica G. (2010) The effects of employment protection legislation and financial market imperfections on investment: evidence from a firm-level panel of EU countries. Economic Policy 25(61): 117–163

    Article  Google Scholar 

  • Cohen D., Soto M. (2007) Growth and human capital: Good data, good results. Journal of Economic Growth 12(1): 51–76

    Article  Google Scholar 

  • Coulombe, S., & Tremblay, J.-F. (2006). Literacy and growth. Topics in Macroeconomics 6(2), Article 4.

  • Cunha F., Heckman J. (2007) The technology of skill formation. American Economic Review 97(2): 31–47

    Article  Google Scholar 

  • Cunha F., Heckman J. J., Lochner L., Masterov D. V. (2006) Interpreting the evidence on life cycle skill formation. In: Hanushek E. A., Welch F. (eds) Handbook of the Economics of Education. Elsevier, Amsterdam, pp 697–812

    Chapter  Google Scholar 

  • Dolton P., Marcenaro-Gutierrez O. D. (2011) If you pay peanuts do you get monkeys? A cross country analysis of teacher pay and pupil performance. Economic Policy 26(65): 7–55

    Article  Google Scholar 

  • Ehrlich, I. (2007). The mystery of human capital as engine of growth, or why the US became the economic superpower in the 20th Century. NBER Working Paper 12868. Cambridge, MA: National Bureau of Economic Research (January).

  • Fuller W. A. (1977) Some properties of a modification of the limited information estimator. Econometrica 45(4): 939–954

    Article  Google Scholar 

  • Glaeser E. L., La Porta R., Lopez-de-Silanes F., Shleifer A. (2004) Do institutions cause growth?. Journal of Economic Growth 9(3): 271–303

    Article  Google Scholar 

  • Glenn C. L., De Groof J. (2002) Finding the right balance: Freedom, autonomy and accountability in education, Vol. II. Lemma Publishers, The Netherlands

    Google Scholar 

  • Goldin C., Katz L. F. (2008) The race between education and technology. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Gundlach E., Woessmann L., Gmelin J. (2001) The decline of schooling productivity in OECD countries. Economic Journal 111(May): C135–C147

    Article  Google Scholar 

  • Hahn J., Hausman J. A., Kuersteiner G. (2004) Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations. Econometrics Journal 7(1): 272–306

    Article  Google Scholar 

  • Hanousek J., Hajkova D., Filer R. K. (2008) A rise by any other name? Sensitivity of growth regressions to data source. Journal of Macroeconomics 30(3): 1188–1206

    Article  Google Scholar 

  • Hanushek E. A. (2002)  Publicly provided education. In: Auerbach A. J., Feldstein M. (eds) Handbook of Public Economics. Elsevier, Amsterdam, pp 2045–2141

    Chapter  Google Scholar 

  • Hanushek E. A., Kimko D. D. (2000) Schooling, labor force quality, and the growth of nations. American Economic Review 90(5): 1184–1208

    Article  Google Scholar 

  • Hanushek E. A., Woessmann L. (2008) The role of cognitive skills in economic development. Journal of Economic Literature 46(3): 607–668

    Article  Google Scholar 

  • Hanushek E. A., Woessmann L. (2011a) The economics of international differences in educational achievement. In: Hanushek E. A., Machin S., Woessmann L. (eds) Handbook of the Economics of Education, Vol. 3. North Holland, Amsterdam, pp 89–200

    Chapter  Google Scholar 

  • Hanushek E. A., Woessmann L. (2011b) How much do educational outcomes matter in OECD countries?. Economic Policy 26(67): 427–491

    Article  Google Scholar 

  • Hanushek E. A., Woessmann L. (2011c) Sample selectivity and the validity of international student achievement tests in economic research. Economic Letters 110(2): 79–82

    Article  Google Scholar 

  • Hanushek, E. A., & Woessmann, L. (2012). Schooling, educational achievement, and the Latin American growth puzzle. Journal of Development Economics (forthcoming).

  • Hanushek E. A., Zhang L. (2009) Quality-consistent estimates of international schooling and skill gradients. Journal of Human Capital 3(2): 107–143

    Article  Google Scholar 

  • Hausmann R., Pritchett L., Rodrik D. (2005) Growth accelerations. Journal of Economic Growth 10(4): 303–329

    Article  Google Scholar 

  • Heckman J. J., Lochner L. J., Todd P. E. (2008) Earnings functions and rates of return. Journal of Human Capital 2(1): 1–31

    Article  Google Scholar 

  • Heckman J. J., Stixrud J., Urzua S. (2006) The effects of cognitive and noncognitive abilities on labor market outcomes and social behavior. Journal of Labor Economics 24(3): 411–482

    Article  Google Scholar 

  • Hendricks L. (2002) How important is human capital for development? Evidence from immigrant earnings. American Economic Review 92(1): 198–219

    Article  Google Scholar 

  • Heston A., Summers R., Aten B. (2002) Penn World Table Version 6.1. Center for International Comparisons at the University of Pennsylvania (CICUP). University of Pennsylvania, Philadelphia

    Google Scholar 

  • Heston, A., Summers, R., & Aten, B. (2011). Penn World Table Version 7.0. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania Philadelphia: University of Pennsylvania (June 3 update).

  • Jones B. F., Olken B. A. (2008) The anatomy of start-stop growth. Review of Economics and Statistics 90(3): 582–587

    Article  Google Scholar 

  • Katz L. F., Autor D. H. (1999) Changes in the wage structure and earnings inequality. In: Orley A., Card D. (eds) Handbook of Labor Economics. Elsevier, Amsterdam, pp 1463–1558

    Chapter  Google Scholar 

  • Krueger A. B., Lindahl M. (2001) Education for growth: Why and for whom?. Journal of Economic Literature 39(4): 1101–1136

    Article  Google Scholar 

  • Lazear E. P. (2003) Teacher incentives. Swedish Economic Policy Review 10(3): 179–214

    Google Scholar 

  • Lee J.-W., Barro R. J. (2001) Schooling quality in a cross-section of countries. Economica 68(272): 465–488

    Article  Google Scholar 

  • Levine R., Renelt D. (1992) A sensitivity analysis of cross-country growth regressions. American Economic Review 82(4): 942–963

    Google Scholar 

  • Lucas R. E. Jr. (1988) On the mechanics of economic development. Journal of Monetary Economics 22(1): 3–42

    Article  Google Scholar 

  • Mankiw N. G., Romer D., Weil D. (1992) A contribution to the empirics of economic growth. Quarterly Journal of Economics 107(2): 407–437

    Article  Google Scholar 

  • Mincer J. (1974) Schooling, experience, and earnings. NBER, New York

    Google Scholar 

  • Moreira M. J. (2003) A conditional likelihood ratio test for structural models. Econometrica 71(4): 1027–1048

    Article  Google Scholar 

  • Mulligan, C. B. (1999). Galton versus the human capital approach to inheritance. Journal of Political Economy 107(6), pt. 2 (December): S184–S224.

    Google Scholar 

  • Murnane R. J., Willett J. B., Duhaldeborde Y., Tyler J. H. (2000) How important are the cognitive skills of teenagers in predicting subsequent earnings?. Journal of Policy Analysis and Management 19(4): 547–568

    Article  Google Scholar 

  • Murnane R. J., Willett J. B., Levy F. (1995) The growing importance of cognitive skills in wage determination. Review of Economics and Statistics 77(2): 251–266

    Article  Google Scholar 

  • Neidorf T. S., Binkley M., Gattis K., Nohara D. (2006) Comparing mathematics content in the National Assessment of Educational Progress (NAEP), Trends in International Mathematics and Science Study (TIMSS), and Program for International Student Assessment (PISA) 2003 assessments. National Center for Education Statistics, Washington

    Google Scholar 

  • Nelson R. R., Phelps E. (1966) Investment in humans, technology diffusion and economic growth. American Economic Review 56(2): 69–75

    Google Scholar 

  • Nicoletti G., Scarpetta S. (2003) Regulation, productivity, and growth: OECD evidence. Economic Policy 18(1): 10–72

    Google Scholar 

  • Nuxoll D. A. (1994) Differences in relative prices and international differences in growth rates. American Economic Review 84(5): 1423–1436

    Google Scholar 

  • Organisation for Economic Co-operation and Development: (1998) Education at a glance: OECD Indicators. Organisation for Economic Co-operation and Development, Paris

    Google Scholar 

  • Organisation for Economic Co-operation and Development: (2004) Learning for tomorrow’s world: First results from PISA 2003. OECD, Paris

    Google Scholar 

  • Pritchett L. (2006) Does learning to add up add up? The returns to schooling in aggregate data. In: Hanushek E. A., Welch F. (eds) Handbook of the Economics of Education. North Holland, Amsterdam, pp 635–695

    Chapter  Google Scholar 

  • Ramirez F., Luo X., Schofer E., Meyer J. (2006) Student achievement and national economic growth. American Journal of Education 113(1): 1–29

    Article  Google Scholar 

  • Riley J. G. (2001) Silver signals: Twenty-five years of screening and signaling. Journal of Economic Literature 39(2): 432–478

    Article  Google Scholar 

  • Romer, P. (1990). Endogenous technological change. Journal of Political Economy 99(5), pt. II: S71–S102.

    Google Scholar 

  • Sachs, J. D., & Warner, A. M. (1995). Economic reform and the process of global integration. Brookings Papers on Economic Activity (1),1–96.

  • Sala-i-Martin X., Doppelhofer G., Miller R. I. (2004) Determinants of long-term growth: A Bayesian Averaging of Classical Estimates (BACE) approach. American Economic Review 94(4): 813–835

    Article  Google Scholar 

  • Schoellman T. (2012) Education quality and development accounting. Review of Economic Studies 79(1): 388–417

    Article  Google Scholar 

  • Spence A. M (1973) Job market signalling. Quarterly Journal of Economics 87(3): 355–374

    Article  Google Scholar 

  • Topel R. (1999) Labor markets and economic growth. In: Orley A., Card D. (eds) Handbook of Labor Economics. Elsevier, Amsterdam, pp 2943–2984

    Chapter  Google Scholar 

  • UNESCO: (1998) World education report, 1998: Teachers and teaching in a changing world. UNESCO, Paris

    Google Scholar 

  • UNESCO: (2005) Education for all: The quality imperative, EFA Global Monitoring Report. UNESCO, Paris

    Google Scholar 

  • Vandenbussche J., Aghion P., Meghir C. (2006) Growth, distance to frontier and composition of human capital. Journal of Economic Growth 11(2): 97–127

    Article  Google Scholar 

  • Weiss A. (1995) Human capital vs. signalling explanations of wages. Journal of Economic Perspectives 9(4): 133–154

    Article  Google Scholar 

  • West M. R., Woessmann L. (2010) ’Every Catholic child in a Catholic school’: Historical resistance to state schooling, contemporary private competition and student achievement across countries. Economic Journal 120(546): F229–F255

    Article  Google Scholar 

  • Woessmann L. (2003a) Central exit exams and student achievement: International evidence. In: Peterson P. E., West M. R. (eds) No child left behind? The politics and practice of school accountability. Brookings Institution Press, Washington D.C., pp 292–323

    Google Scholar 

  • Woessmann L. (2003b) Schooling resources, educational institutions, and student performance: The international evidence. Oxford Bulletin of Economics and Statistics 65(2): 117–170

    Article  Google Scholar 

  • Woessmann L., Luedemann E., Schuetz G., West M. R. (2009) School accountability, autonomy, and choice around the world. Edward Elgar, Cheltenham, UK

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Hoover Institution, Stanford University, Stanford, CA, 94305-6010, USA

    Eric A. Hanushek

  2. CESifo, University of Munich, Munich, Germany

    Eric A. Hanushek & Ludger Woessmann

  3. NBER, National Bureau of Economic Research (NBER), Cambridge, MA, USA

    Eric A. Hanushek

  4. Ifo Institute for Economic Research, University of Munich, Poschingerstr. 5, 81679, Munich, Germany

    Ludger Woessmann

Authors
  1. Eric A. Hanushek
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ludger Woessmann
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Eric A. Hanushek.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Hanushek, E.A., Woessmann, L. Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation. J Econ Growth 17, 267–321 (2012). https://doi.org/10.1007/s10887-012-9081-x

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10887-012-9081-x

Keywords

Search

Navigation