South Asia Regional Conference on Education Quality
Schooling Quality and
Economic Growth
Eric A. Hanushek
Stanford University
Importance of Human Capital Policy
Focus


Traditional emphasis on school attainment
Development of access programs


Centerpiece of Millennium Development Goals
Education for All initiative

Some clear successes and some continuing
challenges

New evidence that QUALITY is the primary
issue
Overview of Discussion

Importance of quality (cognitive skills)




Policy actions and reform




Economic growth
Individual earnings
Distributional outcomes
Resource policies
Supply side incentives
Demand side incentives
Importance of information
School Expectancy, 2001
Total
Male
Female
World
10.3
10.7
9.8
Countries in transition
12.5
12.2
12.6
Developed countries
15.9
15.2
16.4
Developing countries
9.5
10.1
8.9
Arab States
10.0
10.6
9.4
Central and Eastern Europe
12.7
12.7
12.7
Central Asia
11.4
11.5
11.3
East Asia and the Pacific
10.9
11.3
10.5
Latin America and the Caribbean
13.0
12.7
13.2
North America and Western Europe
16.3
15.4
16.8
South and West Asia
8.6
9.5
7.6
Sub-Saharan Africa
7.1
7.6
6.4
Cognitive Skills: International Student
Achievement Tests


Measuring knowledge, not sitting in the classroom
International agencies have conducted many
international 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
International Achievement
Source: Hanushek and Wößmann (2007).
International Achievement
International Achievement
Education Quality and Economic Growth
Quantity of Schooling
With quality control
Without quality control
Education
Quality
and
Openness
Effect of test score on growth
3
2.5
2
1.5
1
0.5
Openness
0
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
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 Wößmann (2007).
Implications of Reform

Speed of reform


10, 20, 30 years
Magnitude of reform

½ standard deviation



Half distance of Mexico, Indonesia, Chile to OECD
U.S., Germany to East Asian
Full impact felt 35 years after completion of
reform
Improved GDP with Moderately Strong Knowledge
Improvement (0.5 s.d.)
30%
20%
10%
year
20-year reform
30-year reform
typical education spending
80
20
75
20
70
20
65
20
60
20
55
20
50
20
45
20
40
20
35
20
30
20
25
20
20
20
15
20
10
20
05
0%
20
percent additions to GDP
40%
Other Benefits of Improved Cognitive
Skills

Individual earnings


Developed countries
Developing countries
Estimated Returns to Cognitive Skills
Country
Ghana
Study
Glewwe (1996)
Ghana
Jolliffe (1998)
Estimated effecta
0.21**-0.3**
(government)
0.14-0.17 (priv.)
0.05-0.07*
Ghana
Vijverberg (1999)
?
Kenya
Boissiere, Knight, and
Sabot (1985); Knight
and Sabot (1990)
Angrist and Lavy
(1997)
0.19**-0.22**
Alderman, Behrman,
Ross, and Sabot
(1996)
Behrman, Ross, and
Sabot (forthcoming)
0.12-0.28*
Moll (1998)
0.34**-0.48**
Boissiere, Knight, and
Sabot (1985); Knight
and Sabot (1990)
0.07-0.13*
Morocco
Pakistan
Pakistan
South
Africa
Tanzania
?
0.25
Notes
Alternative estimation approaches yield some differences; math
effects shown generally more important than reading effects, and all
hold even with Raven’s test for ability.
Household income related to average math score with relatively small
variation by estimation approach; effect is only observed with offfarm income, and on-farm income is not significantly related to
cognitive skills.
Income estimates for math and reading with nonfarm selfemployment; highly variable estimates (including both positive and
negative effects) but effects not generally statistically significant.
Total sample estimates: small variation by primary and secondary
school leavers.
Cannot convert to standardized scores because use indexes of
performance; French writing skills appear most important for
earnings, but results depend on estimation approach.
Variation by alternative approaches and by controls for ability and
health; larger and more significant without ability and health
controls.
Estimates of structural model with combined scores for cognitive
skill; significant effects of combined math and reading scores which
are instrumented by school inputs
Depending on estimation method, varying impact of computation;
comprehension (not shown) generally insignificant.
Total sample estimates: smaller for primary than secondary school
leavers.
*significant at 0.05 level; **significant at 0.01 level.
a. Proportional increase in wages from a one standard deviation increase in measured test scores.
Other Benefits of Improved Cognitive
Skills

Individual earnings



Developed countries
Developing countries
Income distribution
Inequality of Educational Quality and of
Earnings
Earnings inequality
4.5
USA
CAN
4.0
3.5
IRE UK
3.0
AUS
SWI
NET
2.5
FIN
GER
SWE
DEN
2.0
BEL
NOR
1.5
1.3
1.5
1.7
1.9
Test score inequality
Conclusions on Economic Impacts

Powerful effects of cognitive skills on
individual earnings, on the distribution of
income, and on economic growth


Support for causal interpretation
The current situation in developing countries
is much worse than generally pictured on the
basis just of school enrollment and
attainment
Basic Skills
Ghana
never enroll
dropout gr 1-5
dropout gr 5-9
finish gr 9 w/o basic skill
finish gr 9 w/ basic skill
Grade 9
37 %
Fully literate
5%
Basic Skills
Brazil
never enroll
dropout gr 1-5
dropout gr 5-9
finish gr 9 w/o basic skill
finish gr 9 w/ basic skill
Grade 9
22%
Fully literate
8%
Basic Skills
Morroco
never enroll
dropout gr 1-5
dropout gr 5-9
finish gr 9 w/o basic skill
finish gr 9 w/ basic skill
Grade 9
28%
Fully literate
13%
Distribution of Education Quality
2.7% Estonia
Taiwan 21.9%
8.2%
USA
7.3%
Brazil
66.2%
Source: Hanushek and Wößmann (2007).
81.8%
Peru
Cognitive Skill Production

Families
Peers
Community and neighborhood
Schools

Policy largely around schools




but other interventions such as health programs
Resource Policies


Little evidence of success
Cross country evidence
Expenditure per Student and
Student Performance across Countries
Math performance in PISA 2003
550
Finland
Korea
2
Czech Rep.
R = 0.01
Ireland
Slovak Rep.
500
Poland
Hungary
R 2 = 0.15
Japan
Netherlands
Belgium
Canada
Switzerland
Australia
Iceland Denmark
Sweden France
Austria
Germany
Norway
Spain
USA
Portugal
450
Italy
Greece
400
Mexico
350
0
10000
20000
30000
40000
50000
60000
70000
80000
Cumulative educational expenditure per student
Resource Policies




Little evidence of success
Cross country evidence
Within country – developed
Within country – developing
Resource Policies






Little evidence of success
Cross country evidence
Within country – developed
Within country – developing
Does not say “resources never have effect”
Does not say “resources cannot have effect”
No expectation within current incentive
structure
Teacher Quality

Strongest evidence on systematic effects

Not related to common measures

Observability
Supply Side Incentives



Changing Institutions
Application in both developed and developing
countries
Interpretation – work largely through
changing teacher quality
Institutional Reforms Supported by
Evidence

Centralized exams

Accountability

Autonomy/decentralization

Choice

Direct performance incentives
Autonomy and Central Exams or
Accountability
76.2
80
Math performance
in T IMSS/T IMSS-R
test scores (relative
to lowest category)
70
55.5
60
50
40
30
20
10
Yes
23.7
0
0.0
No
School autonomy
over teacher salaries
Yes
No
Central
exams
Demand Side Incentives

Application mainly in developing countries

Motivated by access/attainment issues

Work through changing student and family
behavior

Programs carefully evaluated
Range of programs

Conditional cash transfers


Fee reduction


Mexico, Brazil, Columbia, Nicaragua
Indonesia, Cambodia, Taiwan, Kenya*
Food and nutrition supplements

Bangladesh, India, Kenya
Results of Demand Side Incentives

Aimed generally at encouraging
attendance/completion




Rewards linked to being in school
Supports Education for All
Each has positive (and significant) impact on
attendance and attainment
But, with exception of Kenyan merit
scholarship, little or no apparent impact on
achievement
Conclusions on Demand Side Incentives


Incentives have impact on behavior
Requires care in structuring incentives



May be perverse effects


Ensure that goals are correct
Do not assume other outcomes
Access and quality trade-offs
Access viewed as “equity”

Equity not supported by low quality
Information and Feedback

Assessments very bad



Limited national assessments
International assessments problematic
No regular evaluation function


Local variation in effectiveness
No simple solutions
Conclusions

School quality is not easily changed

Focus on Incentives but be careful

Information shortage critical


Student performance
Program feedback