What Works in Education to Get Economies Moving and to Sustain Growth?

Last week I gave the Keynote Speech at the 8th Global Educational Supplies and Solutions (GESS) Dubai and Global Education Forum.  I affirmed the important role of education in society in my presentation, “What Works in Education to Get Economies Moving and to Sustain Growth?”  I said that education is one of the most powerful tools for reducing poverty and inequality and for laying the foundations of economic growth.

Among the highlights of my speech, I emphasized the following:

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 and that countries able to increase education quality tend to grow more.  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 earnings.  Economists have long recognized and measured the lifetime benefits of education from improved learning opportunities. A growing body of evidence 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.

  • A 1% increase in the adult literacy skill raises productivity by 2.5% in OECD countries
  • A 1 standard deviation increase in international cognitive test scores is associated with a 1 percentage point higher growth rate

Countries able to increase education quality tend to grow more. We know that from cross-county analyses using test score and other data for many countries.  In a recent study, we examine the importance of adult functional literacy skills for individuals within a country (using a quantile regression methodology). The inclusion of the direct measure of basic skills reduces the return to years of schooling by 27 percent, equivalent to two additional years of schooling.  That is, quality matters a lot for determining earnings.  Furthermore, a one standard deviation increase in the test score increases earnings by 20 percent.  For those who are less skilled (cognitive ability), more years of schooling contributes little to earnings; rather, skills are the key to higher earnings.  The non-schooling component of skill is a significant contributor to earnings, but not the component associated with years of schooling.

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