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

65 Pages Posted: 21 Jan 2009

See all articles by Eric A. Hanushek

Eric A. Hanushek

Stanford University - Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Ludger Woessmann

Ifo Institute for Economic Research; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Munich - Ifo Institute for Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: January 2009

Abstract

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.

JEL Classification: O4, I2

Suggested Citation

Hanushek, Eric A. and Woessmann, Ludger, Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation (January 2009). CESifo Working Paper Series No. 2524. Available at SSRN: https://ssrn.com/abstract=1330812

Eric A. Hanushek

Stanford University - Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States
650-736-0942 (Phone)
650-723-1687 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

Ludger Woessmann (Contact Author)

Ifo Institute for Economic Research ( email )

Poschingerstr. 5
Munich
Germany
++49 89 9224 1699 (Phone)
++49 89 9224 1460 (Fax)

HOME PAGE: http://www.cesifo.de/link/woessmann_l.htm

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Munich - Ifo Institute for Economic Research

Schackstr. 4
Munich, 80539
Germany

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