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

In this paper, the authors develop a new metric for the distribution of educational achievement across countries that can further track the cognitive skill distribution within countries and over time. A close relationship between educational achievement and GDP growth is identified that is remarkably stable. In a series of approaches for addressing causality, the authors narrow the range of plausible interpretations of this strong cognitive skills-growth relationship. These alternative estimation approaches leave the stylized fact of a strong impact of cognitive skills unchanged. Moreover, the results indicate that school policy can be an important instrument to spur growth. The shares of basic literates and high performers have independent relationships with growth, the latter being larger in poorer countries.

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