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Numerous studies examined educational policies at the student, school and country level (for literature overview see Smidova, 2019) and main OECD country experiences are summarised by the OECD’s Directorate for Education and Skills in Education GPS).

As the new human capital measure is built on years of schooling and rates of return to education, policies influencing education matter. The empirical analysis shows that the following educational policies tend to boost human capital at the country level (Égert, Botev and Turner, 2019):

First, more children attending pre-primary education improve human capital, especially in countries with above-average share of disadvantaged children. This result based on macroeconomic data is in line with the microeconomic literature.
Another finding is that teaching resources matter. Fewer students per teacher boost human capital, which can be thought of as a crude measure of the teaching quality. We also found some evidence showing that higher share of qualified teachers is good for human capital.
Third, streaming children at a later age into different education tracks such as vocational and grammar schools based on their ability or achievement has a positive impact.
Schools having more autonomy and leeway on how to manage their resources is good for human capital. This positive effect is greater in countries with external central exams that captures external accountability imposed on schools.
Finally, countries, in which universities have more autonomy in how they can allocate their resources, have higher human capital and the ease of access to individual financing of university education helps to raise a country’s human capital. It should be noted, however, that these results are less robust.

Furthermore, the analysis shows that certain educational policies are ‘good value for money’, because they have a double dividend of boosting human capital as well as reducing spending pressures. These are: increasing attendance in pre-primary education, greater university autonomy and lower barriers to funding to students in tertiary education. Increasing school autonomy at primary and secondary level enhances educational outcomes, but does not reduce spending pressures. And, higher student-to-teacher ratio, higher age of first tracking and a reduction in the extent of tracking also boost human capital, but at a higher cost.

Illustrative impact on a median country: Reform that moves the policy to the average of the top 3 OECD performers.‌‌‌

The full impact takes decades to show, but positive impact is visible already in medium term (5 years). The size of impact depends on each country’s scope for reform, i.e. where does it stand in terms of the policy today. To see potential reform impact in your country, go to the dataviz below.