What Works in Education to Get Economies Moving and to Sustain Growth? (Part 1)

What Works in Education to Get Economies Moving and to Sustain Growth? (Part 1)
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What does the evidence tell us in terms of education’s role in catalyzing economic development and growth?

Education is one of the most powerful instruments for reducing poverty and inequality and for laying the basis for sustained economic growth. The importance of an educated population is well established. Recent evidence points to the need to make sure that the increasingly “schooled” population is also effective in terms of competencies and abilities. For instance, it is not sufficient to simply increase school access and years of schooling attainment if that schooling is not also of high quality. That is, schools should ensure the attainment of cognitive skills and other competencies needed in society and the labor market. Studies show that students with high academic achievement earn more (eg, Behrman, Ross and Sabot 2008; Patrinos and Sakellariou 2013) and that countries able to increase education quality tend to grow more (Hanushek and Woessmann 2007). Higher student achievement, as measured in test scores, along with high schooling attainment, in terms of years of schooling completed, will lead to sustained poverty reduction, income growth, and fewer equity gaps.

Between 2000 and 2011, the number of children out of school declined by almost half—from 102 million to 57 million. The poorest children are most likely to be out of school. Girls are more likely to be out of school than boys among both primary and lower secondary age groups, even for girls living in the richest households. Lack of schooling and poverty are closely related. Poverty is a barrier to achieving economic development. The education - economic growth relation gained credence in the mid-1990s because the economic progress of East Asian countries in 1970s and 1980s was primarily due to their investment in education. The higher the level of education of the population, lesser will be the number of poor persons because education imparts knowledge and skills which is correlated with higher rates of growth and earnings:

· A 1% increase in the adult literacy skill raises productivity by 2.5% in OECD countries (Coulombe, Tremblay and Marchand 2004)

· A 1 standard deviation increase in international cognitive test scores is associated with a 1 percentage point higher growth rate (Hanushek and Woessmann 2012).

Economists have long recognized and measured the lifetime benefits of education from improved learning opportunities (eg, Card 1999). A growing body of evidence (eg, Lochner 2011) suggests that education can reduce crime, improve health, lower mortality, and increase political participation. A lack of investment in quality education leads to much lower rates of growth (Patrinos and Psacharopoulos 2011).

The relationship between years of schooling and per capita income

Better schooling investments raise national income growth rates. Two Harvard economists, Lawrence F. Katz and Claudia Goldin (2007), studied the effect of increases in educational attainment in the United States labor force from 1915 to 1999. They estimated that those gains directly resulted in at least 23 percent of the overall growth in productivity, or around 10 percent of growth in gross domestic product. Awel (2013) shows the causal relationship between human capital and economic growth for Sweden over the period 1870-2000. There is bidirectional causality running from human capital to output per worker and vice versa, and human capital has a significant positive impact on economic growth in Sweden (see also Ljungberg and Nilsson 2009).

In nearly all countries, though to varying degrees, educational progress has lagged for groups that are disadvantaged due to low income, gender, disability or ethnic and/or linguistic affiliation. Leaving poor people, girls and minority groups at the fringes of the education system will eventually impede a country’s ability to maintain educational progress and achieve socioeconomic development.

This is the first in a series of blogs on how education can help re-ignite and sustain economic growth and development.

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