How Much do Educational Outcomes Matter in European Union Countries? Eric A. Hanushek Stanford University Ludger Woessmann University of Munich, ifo Institute Effective policies for the development of competencies of youth in Europe Warsaw, Poland November 2011
Plan for Discussion School quality and economic growth - Cognitive skills - Early versus late investment Special policy considerations - Basic skills v. advanced skills - Tertiary education Some policy options
Human Capital in Empirical Growth Simple cross-country growth regressions - Enrollment rates Wide variety of measurement alternatives - Literacy - School enrollment and attainment
Years of Schooling and Long Run Economic Growth
Human Capital in Empirical Growth Simple cross-country growth regressions - Enrollment rates Wide variety of measurement alternatives - Literacy - School enrollment and attainment Cognitive skills - Measuring knowledge, not sitting in the classroom - International tests of students performance in cognitive - 12 testing occasions, 36 separate test observations (age levels, subjects)
Cognitive Skills and Economic Growth
Years of Schooling and Economic Growth With quality control Without quality control
Rocket Scientists or Basic Education for All? Should policy concentrate on lowest or highest achievers?
Selected Examples of the Distribution of Student Performance
Rocket Scientists or Basic Education for All? Should policy concentrate on lowest or highest achievers? - BOTH seem important - Rocket scientists more important in developing countries Does more tertiary education make sense? - Frontier vs. off-frontier - No evidence for developing or developed after considering cognitive skills
Estimating the Value of School Reform Reform that increases achievement - 20 years to reach new levels Assume future growth like 1960-2000 growth - Holds for former communist members Discount future at 3 percent Growth without education reform at 1.5 percent Calculate present value over lifetime of person born today - 80 year expected life - 40 year working life
Scenario 1 Growth Projections - Achievement improves by 25 points (1/4 s.d.)
60% Annual Gains from 25 PISA-Points Improvement (1/4 std. dev.) 50% Percent addition to annual GDP 40% 30% 20% 10% 0% 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 Year
60% Annual Gains from 25 PISA-Points Improvement (1/4 std. dev.) 50% Percent addition to annual GDP 40% 30% 20% 10% 0% 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 Year
60% Annual Gains from 25 PISA-Points Improvement (1/4 std. dev.) 50% Percent addition to annual GDP 40% 30% 20% 10% 0% 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110 Year
Scenario 1 Growth Projections - Achievement improves by 25 points (1/4 s.d.) - PV = 288% of current GDP - 6.2% of present value of GDP 2010-2090 - 35T for European Union
Present Value of Added GDP from ¼ Standard Deviation Improvement in Achievement 6,000 5,000 4,000 3,000 2,000 1,000 0 Germany United_Ki France Italy Spain Poland Netherlands Belgium Sweden Greece Austria Romania Czech_Re Portugal Denmark Hungary Finland Ireland Slovakia Bulgaria Slovenia Lithuania Luxembourg Latvia Estonia Cyprus Malta
Growth Projections Scenario 1 - Achievement improves by 25 points (1/4 s.d.) Scenario 2 - Everybody Achieves at Level of Finland - PV = 785% of current GDP in EU-27-16.8% of present value of GDP 2010-2090 - 95 trillion for European Union
Present Value of Added GDP from Increasing to the Achievement of Finland (% of current GDP) 2000% 1500% 1000% 500% 0% Romania Bulgaria Cyprus Malta Greece Italy Portugal Spain Lithuania Latvia Luxembourg Slovakia EU-27 France Poland EU-15 Hungary Sweden Denmark Ireland United Austria Germany Czech Slovenia Belgium Estonia Netherlands Finland
Present Value of Added GDP from Increasing to the Achievement of Finland 17,500 15,000 12,500 10,000 7,500 5,000 2,500 0 Italy France Germany United_Ki Spain Romania Poland Greece Portugal Sweden Netherlands Belgium Austria Bulgaria Czech_Re Hungary Denmark Ireland Slovakia Lithuania Cyprus Luxembourg Slovenia Latvia Malta Estonia Finland
Growth Projections Scenario 1 - Achievement improves by 25 points (1/4 s.d.) Scenario 2 - Everybody Achieves at Level of Finland Scenario 3 - Less than 15% at Level 1 or below (basic skills) - PV = 211% of current GDP in EU-27-4.5% of present value of GDP 2010-2090 - 25 trillion for European Union
Present Value of Europe 2020 Literacy Benchmark: Less than 15% Below Level 1 (% current GDP) 1000% 500% 0% Romania Bulgaria Cyprus Malta Italy Greece Portugal Luxembourg Spain France Lithuania EU-27 EU-15 Slovakia Latvia Poland United Austria Hungary Germany Czech Sweden Belgium Denmark Slovenia Ireland Finland Netherlands Estonia
Present Value of Europe 2020 Literacy Benchmark: Less than 15% Below Level 1 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Italy France Romania Spain Germany United_Ki Greece Bulgaria Portugal Poland Austria Belgium Sweden Cyprus Slovakia Czech_Re Hungary Lithuania Denmark Luxembourg Malta Ireland Latvia Slovenia Netherlands Finland Estonia
Do Skills Cause Growth? Simple reverse causation Omitted factors - Institutions (openness, property rights) - Regulations
Trends in Test Scores 560 540 Japan Korea Japan Korea Finland Netherlands N. Zealand Canada Australia UK 520 500 N. Zealand Norway Australia Netherlands UK Finland France Belgium Canada Sweden Germany USA Sweden France Belgium Norway USA Germany 480 Italy Italy 460 1975 2000
Trends in Growth Rates vs. Trends in Test Scores
Spending Policy options
500 450 Resources and Performance across Math performance in PISA 2003 550 Slovak Rep. Czech Rep. R 2 = 0.01 Poland R 2 = 0.15 Hungary Countries Korea Ireland Greece Finland Japan Netherlands Canada Belgium Switzerland Australia IcelandDenmark Sweden France Germany Austria Norway Spain USA Portugal Italy 400 Mexico 350 0 10000 20000 30000 40000 50000 60000 70000 80000 Cumulative educational expenditure per student
Spending Teacher quality Policy options
Teacher Quality Strongest evidence on systematic effects Not related to common measures Observable through both student performance and supervisor ratings
Spending Teacher quality Policy options Institutional changes 1. Competition and choice (private schools) 2. Accountability (central exit exams) 3. Autonomy 4. Teacher performance pay 5. Pre-primary education system
How Autonomy Affects Student Performance Depending on Given Incentives School autonomy 1. Use of superior local knowledge 2. Opportunistic behavior School autonomy may be good or bad Complementary institutions
How Central Exams Change Behavior Thus Changing the Effects of Autonomy Central exams provide information Central exams ease the monitoring By introducing accountability, central exams ease the bad effects of autonomy, ensuring a good net effect
Central Exams, School Autonomy, and Student Performance Math test score 80 70 76.2 60 55.5 50 40 30 20 23.7 10 Yes 0 No School autonomy over teacher salaries Yes 0.0 No Central exams TIMSS + TIMSS-R
Conclusions Europe 2020 - Correct to emphasize human capital development - Incorrect to headline quantity - Reduce dropouts to less than 10 percent - 40 percent of 30-34 year olds with tertiary education Early versus late investment strategies Vocational v. general education Huge benefits to quality Must deal with myopic pressures of fiscal problems