EDUCATIONAL OUTCOMES IN OECD COUNTRIES
In order to capture these elements, a simple simulation model is developed.
Specifically, we evaluate the economic outcomes of a series of plausible policy
programs including improving student performance by 25 PISA points (1/4 standard
deviation); bringing all countries in the OECD up to the level of Finland; and bringing
all students in OECD countries to minimum proficiency (400 points on the PISA tests).
The present value of the reform efforts vary by country, depending on current
economic performance and current educational performance. However, the simulation
exercises suggest that the aggregate gains across all OECD countries range from $90-
275 trillion for the different policy alternatives. These gains, for example, far exceed the
level of stimulus funds in the current global recession.
We also provide detailed sensitivity analyses of the simulations with respect to a range
of alternative specifications and parameter choices, including use of endogenous-growth
and neoclassical-type specifications of the growth model; consideration of alternative
coefficient estimates from the growth regressions; assessment of the lower and upper
bound of the significance band around the growth-regression estimates; alternative time
horizons for the future effects considered; alternative durations of the reform; alternative
discount rates and growth rates of potential GDP; and alternative durations of working
life.
Knowledge of the potential gains from improving schools does not, however, indicate
what should be done to obtain these results. In fact, school improvement has been high
on the policy agenda of a large number of OECD countries, but the results of actions
have many times fallen short of expectations. Emerging research results suggest that
there are general policies that can promote significantly higher achievement. The final
section considers policy options that could support achievement improvements along the
lines of the simulations.
2. ECONOMIC MODELS AND BASIC RESULTS
The basic theoretical and empirical framework follows developments of growth
modeling over the past two decades. In this work, human capital typically plays a
prominent role, but we present evidence that the measurement of human capital
dramatically alters the assessment of its importance. Building on our database of
international educational outcomes, we provide basic results on the relationship between
educational outcomes and long-run growth in OECD countries.
2.1. Conceptual framework
Economists have considered the process of economic growth for much of the last 100
years, but most studies remained as theory with little empirical work.2 Over the past two
decades, economists linked analysis much more closely to empirical observations and in
2 For an account of the historical development, see Barro and Sala-i-Martin (2004). The associated empirical work
concentrated on within-country analyses such as Solow (1957), Jorgenson and Griliches (1967), or Denison (1985).