Wednesday, December 2, 2009

Education Causes Growth

Two new papers by Hanushek and Woessmann provide powerful new evidence of the causal link between cognitive skills and economic growth:

IZA DP No. 4575

Eric A. Hanushek, Ludger Woessmann:

Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation

We investigate whether a causal interpretation of the robust association between cognitive skills and economic growth is appropriate and whether cross-country evidence supports a case for the economic benefits of effective school policy. We develop a new common metric that allows tracking student achievement across countries, over time, and along the within-country distribution. Extensive sensitivity analyses of cross-country growth regressions generate remarkably stable results across specifications, time periods, and country samples. In addressing causality, we find, first, significant growth effects of cognitive skills when instrumented by institutional features of school systems. Second, home-country cognitive-skill levels strongly affect the earnings of immigrants on the U.S. labor market in a difference-in-differences model that compares home-educated to U.S.-educated immigrants from the same country of origin. Third, countries that improved their cognitive skills over time experienced relative increases in their growth paths. From a policy perspective, the shares of basic literates and high performers have independent significant effects on growth, and the estimates suggest that the high-performer effect is larger in poorer countries.

IZA DP No. 4576

Eric A. Hanushek, Ludger Woessmann:

Schooling, Cognitive Skills, and the Latin American Growth Puzzle

Economic development in Latin America has trailed most other world regions over the past four decades despite its relatively high initial development and school attainment levels. This puzzle can be resolved by considering the actual learning as expressed in tests of cognitive skills, on which Latin American countries consistently perform at the bottom. In growth models estimated across world regions, these low levels of cognitive skills can account for the poor growth performance of Latin America. Given the limitations of worldwide tests in discriminating performance at low levels, we also introduce measures from two regional tests designed to measure performance for all Latin American countries with internationally comparable income data. Our growth analysis using these data confirms the significant effects of cognitive skills on intra-regional variations. Splicing the new regional tests into the worldwide tests, we also confirm this effect in extended worldwide regression! s, although it appears somewhat smaller in the regional Latin American data than in the worldwide data.


Steve Buckstein said...

I note on page 19 of the first study this interesting result:

"School choice, as measured by the share of privately operated schools in a system,
consistently shows a positive association with student achievement in OECD countries...In our sample, the share of private enrollment in a country is significantly positively associated with cognitive skills in the first stage of our IV

America (and Oregon) have lots of choice in higher ed; it's about time we focused on allowing more school choice at the K-12 level.

Patrick Emerson said...

Interesting point. One could imagine a scenario where school choice is efficient in the economic sense (from those more able to learn effectively going to the best schools) and so economic growth benefits. But it is likely that if this were the effect it might reinforce inequality in a society.

Normally in such an instance the economist's answer is to let the market make the surplus as big as possible and redistribute afterword. But if education is also a quality of life issue and/or a human rights issue, this prescription is not appropriate.

Of course there is no reason that school choice has to reinforce inequality, but wealthy, educated households tend to be savvy political and societal actors and so a school choice mechanism that could keep the playing field even would potentially benefit everyone. But just allowing kids to choose schools in general would likely end up, it seems to me, mimicking the same old system we have now.

Steve Buckstein said...

Patrick, Cascade Policy Institute runs a private scholarship program for low-income families in the Portland area and these families have by and large made very good choices for their children.

I believe economist Paul Peterson of Harvard has documented the success of larger school choice programs around the nation.

In DC, for example, where Congress is set to kill a public voucher program for low income kids, thousands of primarily Black youngsters are at risk of being thrown back into the failing DC public school system.

Over and over again we see that such programs, rather than fostering inequality, are actually giving the poorest kids some of the same educational opportunities that wealthier families have.