Cognitive Skills Institutions and Economc Outcomes

8/2/2019 Cognitive Skills Institutions and Economc Outcomes

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2nd International Conference on the Economics of Education

Cognitive Skills, Institutions, andEconomic Outcomes

Eric A. HanushekStanford University

in conjunction withLudger WmannUniversity of Munich and Ifo Institute


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Outline of Talk

Evidence on cognitive skills and economic

growth Institutions and cognitive skills

Issues of causation


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Cognitive Skills and Growth by Regions


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Conclusions

Powerful effects of cognitive skills Individual earnings

Distribution of income

Economic growth

Complementarity of skills and the quality of

economic institutions


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1. Augmented neoclassical growth theoriesMankiw, Romer, and Weil (QJE 1992)

2. Theories of endogenous growth Lucas (JMonE 1988); Romer (JPE 1990); Aghion and

Howitt (1998

3. Theories of knowledge diffusionNelson and Phelps (AER 1966); Benhabib and Spiegel

(JEconGro 2005)

Education in Growth (Theory)


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Empirical Progression

Simple cross-country growth regressions Enrollment rates (Barro 1991)

Wide variety of alternatives literacy (Romer 1991)

school attainment (Barro 1990, Mankiw, Romer, Weil1992),Levine and Renelt 1992)

Cognitive skills Hanushek and Kimko 2000, . . . Hanushek and

Woessmann on-going


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Measuring knowledge, not sitting in the classroom

International agencies have conducted manyinternational tests of students performance in

cognitive skills since mid-1960s 12 testing occasions

36 separate test observations (age levels, subjects)

Require rescaling to obtain combined measure Adjust mean and variance of separate

Cognitive Skills: International Student

Achievement Tests


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Growth of GDP/pop, 1960-2000(1) (2)

GDP per capita 1960 -0.379 -0.302

(4.24) (5.54) Years of schooling 1960 0.369 0.026

(3.23) (0.34)

Test score (mean) 1.980

(9.12)

Openness

Protection against expropriation

Constant 2.785 -4.737(7.41) (5.54)

N 50 50

R2 (adj.) 0.252 0.728

Dependent variable: average annual growth rate in GDP per capita, 1960-2000. t-statistics in parentheses.a Regression includes five regional dummies. Source: Hanushek and Wmann (2007).


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Cognitive Skills and Economic Growth


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Quantity of Schooling

Without quality control

With quality control


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Additional Details

Institutions

Details of distribution

Minimal skills Rocket scientists


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Growth of GDP/pop, 1960-2000(1) (2) (3)a (4)

GDP per capita 1960 -0.379 -0.302 -0.277 -0.351

(4.24) (5.54) (4.43) (6.01)

Years of schooling 1960 0.369 0.026 0.052 0.004

(3.23) (0.34) (0.64) (0.05)

Test score (mean) 1.980 1.548 1.265

(9.12) (4.96) (4.06)

Openness 0.508(1.39)

Protection against expropriation 0.388

(2.29)

Constant 2.785 -4.737 -3.701 -4.695(7.41) (5.54) (3.32) (5.09)

N 50 50 50 47

R2 (adj.) 0.252 0.728 0.741 0.784

Dependent variable: average annual growth rate in GDP per capita, 1960-2000. t-statistics in parentheses.a Regression includes five regional dummies. Source: Hanushek and Wmann (2007).


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Distribution and Institutions(9) (10)GDP per capita 1960 -0.287 -0.297

(5.12) (5.64)

Years of schooling 1960 0.022 -0.031

(0.28) (0.41)

Share of students above threshold of 400 2.732

(3.61)

Share of students above threshold of 600 12.880

(4.35)

Test score (mean) 0.942

(2.30)

Openness 0.732

(2.13)

Test score * openness 1.609

(2.34)

Constant 1.335 3.814

(2.97) (11.24)

N 50 47

R

2

(adj.) 0.719 0.785Dependent variable: average annual growth rate in GDP per capita, 1960-2000.t-statistics in parentheses. Source: Hanushek and Wmann (2007).


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Education Quality and

Openness

0

0.5

1

1.5

2

2.5

3

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Effect of test score on growth

Openness

Estimated effect of test scores on average annual rate of growth of real GDP per capita in 1960-2000,depending on degree of openness to international trade of a country. Source: Hanushek and Wmann (2007).


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1. Schooling may reflect other attributes of the

economy Strong relationship even if East Asian countries

are excluded

2. Reverse causality

International test scores not systematically relatedto resources

Issues of Causation


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Expenditure-Performance

350

400

450

500

550

0 10000 20000 30000 40000 50000 60000 70000 80000

Math performance in PISA 2003

Cumulative educational expenditure per student

Mexico

Belgium

Iceland

FranceSweden

SwitzerlandDenmark

AustriaNorway

USA

ItalyPortugal

Spain

Korea

GermanyIreland

Czech Rep.

HungaryPoland

Slovak Rep.

Greece

Finland

NetherlandsCanada

Japan

Australia

R2

= 0.15

R2

= 0.01


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Simply identifying East Asian countries

Strong relationship even if East Asian countriesare excluded

Reverse causality

International test scores not systematically relatedto resources

Other efficiency or cultural aspects

Immigrants into U.S.

Issues of Causation


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What explains U.S. growth?

Favorable economic institutions

Early substitution of quantity for quality

Higher education


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Further Robustness Checks

Fertility rate

Geography (latitude; fraction of land intropics)

Alternative specification checks:

Recent tests, early tests, different grade levels,math/science separately, different growth periods


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Trends in Test Scores

Australia

Australia

Belgium

Belgium

Canada

Canada

Finland

Finland

France

FranceUK

UK

Germany

Germany

Italy

Italy

Japan

Japan

Korea

Korea

Netherlands

Netherlands

N. Zealand

N. Zealand

Norway

Norway

Sweden

Sweden

USA

USA

460

480

500

520

540

560

1975 2000


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Trends in growth rates and in test scores


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Conclusions

Powerful effects of cognitive skills Individual earnings

Distribution of income

Economic growth

Complementarity of skills and the quality of

economic institutions

Documents

Cognitive Skills Institutions and Economc Outcomes