Economic growth determines the future well-being of society, but finding ways to influence it has eluded many nations. Empirical analysis of differences in growth rates reaches a simple conclusion: long-run growth in gross domestic product (GDP) is largely determined by the skills of a nation’s population. Moreover, the relevant skills can be readily gauged by standardized tests of cognitive achievement. Over the period 1960–2000, three-quarters of the variation in growth of GDP per capita across countries can be accounted for by international measures of math and science skills. The relationship between aggregate cognitive skills, called the knowledge capital of a nation, and the long-run growth rate is extraordinarily strong.
There are natural questions about whether the knowledge capital–growth relationship is causal. While it is impossible to provide conclusive proof of causality, the existing evidence makes a strong prima facie case that changing the skills of the population will lead to higher growth rates.
If future GDP is projected based on the historical growth relationship, the results indicate that modest efforts to bring all students to minimal levels will produce huge economic gains. Improvements in the quality of schools have strong long-term benefits.
The best way to improve the quality of schools is unclear from existing research. On the other hand, a number of developed and developing countries have shown that improvement is possible.
Article
Education and Economic Growth
Eric A. Hanushek and Ludger Woessmann
Article
The Rationale for Interventions to Foster Child Development
Samuel Berlinski and Marcos Vera-Hernández
Socioeconomic gradients in health, cognitive, and socioemotional skills start at a very early age. Well-designed policy interventions in the early years can have a great impact in closing these gaps. Advancing this line of research requires a thorough understanding of how households make human capital investment decisions on behalf of their children, what their information set is, and how the market, the environment, and government policies affect them. A framework for this research should describe how children’s skills evolve and how parents make choices about the inputs that model child development, as well as the rationale for government interventions, including both efficiency and equity considerations.
Article
The Economics of Early Interventions Aimed at Child Development
Samuel Berlinski and Marcos Vera-Hernández
A set of policies is at the center of the agenda on early childhood development: parenting programs, childcare regulation and subsidies, cash and in-kind transfers, and parental leave policies. Incentives are embedded in these policies, and households react to them differently. They also have varying effects on child development, both in developed and developing countries. We have learned much about the impact of these policies in the past 20 years. We know that parenting programs can enhance child development, that centre based care might increase female labor force participation and child development, that parental leave policies beyond three months don’t cause improvement in children outcomes, and that the effects of transfers depend much on their design. In this review, we focus on the incentives embedded in these policies, and how they interact with the context and decision makers to understand the heterogeneity of effects and the mechanisms through which these policies work. We conclude by identifying areas of future research.
