Abstract

The link between the quality of education and economic performance of a country always rises interest. The governments are interested in saving the financial resources that could possibly be spent on education. Yet, high returns to schooling on the country level naturally would stimulate investment in education. In this paper we use advanced econometric tools to prove that the such returns exist. Hanushek and Woessmann [3] used the 1960-2010 data to explain GDP growth as a function of selected educational indicators. While they did not find evidence of the importance of years of schooling, they claim to have showed the relevance of cognitive skills and basic literacy ratio for the economic growth. However, some doubts may arise. Firstly, Hanushek and Woessmann used the contemporary measurement of cognitive skills based on the results of PISA tests to explain the GDP change over the recent 40 years, while in reality one would expect the quality education to reveal its influence on growth with certain delay. This due to the fact that PISA tests are carried out on teenagers who enter the
labor market 5-10 years later and do not influent it at the time of filling in the test questionnaires. Thus there is a risk of reversed causality of educational and economic performances. Secondly, their regression was based on cross-sectional data on a group of countries, which provided only 23 observations. Finally, their model could be extended by inclusion of other regressors. This would convert it into the augmented Solow’s growth model: a commonly recognized GDP growth model.

Published in: Canada International Conference on Education, 2017

  • Date of Conference: 26-29 June, 2017
  • DOI: 10.2053/CICE.2017.0130
  • Electronic ISBN: 978-1-908320-83-4
  • Conference Location: University of Toronto Mississauga, Canada