How Much Do Educational Outcomes Matter in OECD Countries?

L Woessman, E Hanushek
IZA dp 5401
Existing growth research provides little explanation for the very large differences in long-run growth performance across OECD countries. We show that cognitive skills can account for growth differences within the OECD, whereas a range of economic institutions and quantitative measures of tertiary education cannot. Under the growth model estimates and plausible projection parameters, school improvements falling within currently observed performance levels yield very large gains. The present value of OECD aggregate gains through 2090 could be as much as $275 trillion, or 13.8 percent of the discounted value of future GDP. Extensive sensitivity analyses indicate that, while differences between model frameworks and alternative parameter choices make a difference, the economic impact of improved educational outcomes remains enormous. Interestingly, the quantitative difference
between an endogenous and neoclassical model framework – with improved skills affecting the long-run growth rate versus just the steady-state income level – matters less than academic discussions suggest. We close by discussing evidence on which education policy reforms may be able to bring about the simulated improvements in educational outcomes.

VOX interview with Joel Mokyr

Romesh Vaitilingham interviews Joel Mokyr about the ideas in his book "The Enlightened Economy: An Economic History of Britain from 1700 to 1850" - link here

For God's sake: religion and growth

This is a nice piece discussing work by Barro & McCleary on religion and growth

http://www.boston.com/bostonglobe/ideas/articles/2009/11/15/the_curious_economic_effects_of_religion/?page=full

The Costs of Economic Growth

In a similar vein to some recent posts about the interaction of economic factors with social well-being, Stanford's Chad Jones has a working paper that takes a more theoretical approach:

The benefits of economic growth are widely touted in the literature. But what about the costs? Pollution, nuclear accidents, global warming, the rapid global transmission of disease, and bioengineered viruses are just some of the dangers created by technological change. How should these be weighed against the benefits, and in particular, how does the recognition of these costs affect the theory of economic growth? This paper shows that taking these costs into account has first order consequences. Under standard preferences, the value of life may rise faster than consumption, leading society to value safety over economic growth. As a result, the optimal rate of growth may be substantially lower than what is feasible, in some cases falling all the way to zero.

This approach to optimal growth seems more consistent with the thrust of the behavioural literature on smoothing.