Journal of Economic Growth

, Volume 17, Issue 4, pp 267–321 | Cite as

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

Article

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.

Keywords

Cognitive skills Long run growth Causation and identification School quality Educational achievement 

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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Hoover InstitutionStanford UniversityStanfordUSA
  2. 2.CESifoUniversity of MunichMunichGermany
  3. 3.NBER, National Bureau of Economic Research (NBER)CambridgeUSA
  4. 4.Ifo Institute for Economic Research, University of MunichMunichGermany

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