Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation
We provide evidence that the robust association between cognitive skills and economic growth reflects a causal effect of cognitive skills and supports 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 that are complementary to each other, and the high-performer effect is larger in poorer countries.
We thank Mark Bils, Pete Klenow, and participants at seminars at Stanford University, the London School of Economics, and the Institute for International Economic Studies, Stockholm University. We are grateful to the International Association for the Evaluation of Educational Achievement (IEA) for providing us with the microdata for the FISS, SIMS, and SISS studies. Jason Grissom and Trey Miller provided important research assistance. Support has come from CESifo and the Packard Humanities Institute. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Eric Hanushek & Ludger Woessmann, 2012. "Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation," Journal of Economic Growth, Springer, vol. 17(4), pages 267-321, December. citation courtesy of