Quantifying the effect of policies to promote educational performance on macroeconomic
productivity
This paper evaluates the link between educational policies and i) student performance
and ii) macroeconomic measures of productivity. The analysis has two stages. First,
using the 2015 and 2018 PISA databases, it quantifies the relationship between student
test scores and the characteristics of students taking the tests, their school environment
and national educational systems. Second, assuming that these relationships reflect
the effect of different characteristics/policies on student test performance, the
second stage converts the latter into an estimated effect on macroeconomic measures
of productivity using a new measure of human capital as an intermediary variable.
This new measure of human capital, devised in previous OECD work, combines student
test scores and mean years of schooling with estimated elasticities that suggest the
former is more important. The analysis shows a positive association between spending
on education and student test scores, but only for levels of student expenditure below
the OECD median, suggesting scope for currently low-spending countries to raise student
performance with potential gains to long-run productivity. Boosting participation
in early childhood education as well as improving teacher quality is found to generate
large aggregate productivity gains. There are significant, but smaller, macroeconomic
gains for many countries from limiting grade repetition and ability grouping across
all subjects as well as increasing the accountability of schools. Finally, the results
provide evidence for income inequality having a major influence on productivity through
a human capital channel.
Published on December 22, 2023
In series:OECD Economics Department Working Papersview more titles