Do Cognitive Skills Impact Growth or Levels of GDP Per Capita?

27 Pages Posted: 8 Aug 2016

See all articles by Assaf Sarid

Assaf Sarid

University of Haifa

Zvi Eckstein

The Interdisciplinary Center (IDC); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Yuli (Yael) Tamir

Shenkar College of Engineering and Design

Date Written: August 2016

Abstract

Incredible policy attention has been given to the claim that an increase in the quality of education as measuredby international tests (e.g. PISA tests) has a significant impact on the GDP long-run growth rate (Hanushek and Woessmann, 2015). This study is based mostly on aggregate data from the second half of the century, and never addresses the question of the current paper, which is whether the impact of the quality of cognitive skills affects the level of GDP per capita or the long run growth rate. Focusing on this question, we construct a variant standard growth model in which cognitive skills have theoretically both a level and growth rate effects by assumption. Estimating this model using standard cross-country data and panel data, cognitive skills measured by the methodology of Hanushek and Woessmann (2015) have a significant level effect on GDP but not a growth effect. Therefore, the cognitive skills improvement impact economic growth is bounded.

Keywords: Education and Economic Development, Empirical Studies of Economic Growth, Human Capital

JEL Classification: I20, I25, O15, O47

Suggested Citation

Sarid, Assaf and Eckstein, Zvi and Tamir, Yuli (Yael), Do Cognitive Skills Impact Growth or Levels of GDP Per Capita? (August 2016). CEPR Discussion Paper No. DP11425, Available at SSRN: https://ssrn.com/abstract=2820080

Assaf Sarid (Contact Author)

University of Haifa ( email )

Mount Carmel
Haifa, 31905
Israel

Zvi Eckstein

The Interdisciplinary Center (IDC) ( email )

P. O. Box 167
Herzliya, 69978, PA Pennsylvania 46150
United States
+972 9 9602706 (Phone)
+972 9 9602758 (Fax)

HOME PAGE: http://www1.idc.ac.il/Faculty/Eckstein/index.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Yuli (Yael) Tamir

Shenkar College of Engineering and Design ( email )

Anne Frank St 12
Ramat Gan
Israel

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