The Economics of International Differences in
Educational Achievement
--Eric A. Hanushek
--Ludger Woesmann
National Bureau of Economic Research (NBER), Working paper 15494, April 2010
Presented by
Md. Ismail Hossain
PhD candidate in Labour Studies
Introduction
Number of international assessments on identifying
the factors of educational achievement and impact of
skills on economic and social outcomes, where
individual skills are important but generally captured
under the blanket of human capital.
The concept of human capital is defined by Mincer
(1970) in terms of school attainment.
Very often school attainment is taken virtually as a
synonym for human capital, which ignores other
elements of skill development except family influence
and governmental investments. These omitted elements
are considered here as cognitive skills, an indication of
human capital.
International consortia on Educational Achievement Research
 Program for International student Assessment (PISA)—testing math,
science and reading performance of 15-years olds on three years cycle
since 2000
 Trends in International Mathematics and Science Study (TIMSS) –
testing math and science performance of eight graders on a four year
cycle since 1995
 Progress in International Reading Literacy Study (PIRLS)—testing
primary school performance on a five year cycle since 2001
International Test of Educational Achievement
 The first international test was ‘First International Mathematics Study
(FIMS) conducted in 1964 where 12 countries participated.
 International Association for the Evaluation of Educational
Achievement (IEA) developed a cooperative venture to test
educational achievement where a set of nations voluntarily
participated.
 IEA efforts have been matched by an ongoing testing progrmme from
the OECD and have expanded dramatically in terms of participating
countries. While 29 countries in 1996, a total of 96 countries by 2007
and it will rise to 102 in 2011 .
results may be influenced by differences in the extent
 Criticism
of samples, e. g., entire student population
sample selection is a potential to undermine validity, a
major source of bias
Purpose of this study
The aim of this study is to look at the impacts of human capital on
economic outcomes. Therefore, it starts from the measures of
cognitive skills as a measure of human capital.
The focus of this research covers two direction
 To understand the underlying determinants of cognitive skills
 Consequences of skill differences
Economic motivation
 O=yH+Xβ+ε
………………….. (1)
where , O is individual earnings
H is Human capital
X includes such things as labour market experience of the worker,
gender and health status
The question is how to measure human capital? Is it simply
substituted by school attainments, S?
Skills is affected by a number of factors including family inputs (F),
quality and quantity of inputs provided by schools (qS), individual
ability (A) and other relevant factors (Z) which include labour market
experience, health and so forth. So the formula is like this;
H= λF+ φ(qS)+ηA+αZ+v
………………………..(2)
Determinants of International Educational Achievement
 International evidence on educational production functions
T = a0+a1F + a2R+a3I + a4 A+e
............... (3)
Where, T—is the outcome of the educational production process
F—is the facets of student and family background
R—is a vector of measures of school resources
I—is institutional features of schools and education systems and
A—is individual ability
Determinants of International Educational
Achievement
 Student and family background
Family inputs have long been viewed as a leading in educational
production. For the test in math and science among the students controlling
for the immigration status of student mother and father interacted with
family background, the impact of multivariate analysis depicted that
estimates are driven by the coeeficient of books available in the households
 Books at home as a powerful proxy for the educational, social and economic
background of the students families. Number of books at home is the
reflection of parents education, household income and home resources.
Does school input matter?
 Substantial increases in real school expenditure per student did not




lead to improvements in student outcomes in most of the sample
OECD and east Asian countries
At the country level, Lee and Barro (2001) find a positive effect of
smaller teacher student ratios, but Hanushek and Kimko (2000) find
no such relationship
Measures of teacher education tend to show positive associations with
student achievement in cross-country analysis
Shortages of materials tend to be negatively associated with student
outcomes
Teacher’s salary are positively associated with student achievement
(Dolton and Marcenaro-Gutierrez, 2010)
Does school input matter?.....(2)
 Class size effect is
systematically associated with the salary and
education of the teaching force (Woessman and west, 2006;
Woessman,2005).
 The class size effect is tend to be larger in classes that are taught by
teachers with lower education and also find indication of large class
size effect in developing countries. (Altinok and Kingdon, 2009)
 Little evidence have been found on teacher –student gender
interaction on student achievement (Ammermeller and Dolton, 2006)
Does school Input matter?....(3)
 Aggregate financial measure of average expenditure per student
and average achievement
 This figure presents
the
international
association
between
cumulative spending
per student from age 6
to 15 and the average
math achievement of
15 years old on the
2003
PISA
test.
Without considering
the strong outliers of
Mexico and Greece,
there is no association
between
spending
levels and average
achievement
across
countires.
How do institutions matter for IEA?
• Accountability—external exit exam, regular teachers’ monitoring of
student progress (Woessmann 2005, Fuchs and Woessmann, 2007;
Woessmann, Luedemann, Schuetz and west, 2009;
• Autonomy –student performs significantly better in schools that have
autonomy in process and personnel decision which includes deciding
on the purchase of supplies and on budget allocations within schools,
hiring and rewarding teachers, and choosing text books, instructional
methods and the like. (Woessmann, 2003; Fuchs and Woessmann
2007)
• Private versus public management and finance—Students
achievement in schools managed by private is tend to be higher than
public management schools. Equal share of public and private funding
boost up higher student performance than other combinations.
• Tracking—placement of students into different school types
hierarchically structured by performance; homogenous class and mix
class.
How institutions matter for IEA?
 This figure shows the
inequality in reading
achievement in 4°
grade (in PIRLS) and at
age 15 (in PISA 2003)
for all countries that
participated in both
studies,
measuring
educational inequality
by
the
standard
deviation in student
test score.
Is there any relationship of cognitive skills and earning?
‘Mincer’s earning model’ is as follows;
 Where, y is labour market earnings
Exp is labour market experience
W is a vector of other measure factors affecting incomes
b1S is school attainments
How to measure cognitive skills?
 Is it school attainment or years of schooling?
 Association between quantitative measures of schooling and economic
growth—ignores the non schooling factors included in equation (2).
 Is it simply substitution of S by H (human capital)?
School quality is assumed here as constant. Therefore, the extended
model is to include cognitive skills as a measure of school quality.
Y = b0+b1 S + b2Exp+b3Exp2 + b4W+ b5C +v ............... (5)
But this model also excludes the non-school influence of cognitive
skills, particularly from the family. Therefore, the modified model is;
∂y/∂S = b1 + b5 (∂C/∂S) ............... (6)
Here, b1 is coefficient of S
What is the role of cognitive skills in economic growth?
 Hanushek and Kim (2000)—
shows
statistically
and
economically
significantly
effect of the cognitive skills on
economic growth in 19602000 including the data from
37 countries
 Hanushek and Woessman
(2008, 2009)—have found
relationship in test score and
economic growth using data
from 50 countries.
 Figure 13
What is the role of cognitive skills in economic growth?...
 Based on the data from International Adult Literacy Survey in 14
OECD countries, Coulombe and Tremblay’s study (2006) shows that
test score measure outperforms quantitative measures of education.
 Jamison, Jamison and Hanushek (2007) study, controlling for a large
number of potentially confounding variables and extending the time
period of analysis, suggest that cognitive skill seem to improve income
levels mainly through speeding up technological progress rather than
shifting the level of the production function or increasing the impact
of an additional year of schooling.
 It can be concluded that cognitive skills are closely related to long-run
growth rates for countries.
Basic skill / Top performance and IQ?
 Basic Skills and Top performance—Hanushek and Woessman’s study
(2009) use the micro data from each of the international assessments
to calculate measures of the share of students’ skills by dividing into
two groups;
 Basic skills—one standard deviation below the OECD mean as the
threshold of basic literacy and numeracy
 Superior performance—one standard deviation above the OECD mean
Their analysis suggest that both measures of test score distribution are
significantly related to economic growth.
 IQ differences have a strong and significant effect on growth rates
even allowing for differences in school attainment.
 IQ has a strong predictive power with economic growth and it makes
earning differences (Jones and Schneider 2006, 2010) and
 It is strongly correlated with the labour force quality (Hanushek and
Kimko)
 So, general conclusion is that school attainment appears less relevant
when IQ measures are included in the analysis (Lynn and Vanhanen,
2002).
Basic skill / Top performance and IQ?...(2)
 In contrary, PISA scores are better predictors of GDP per captia than
measures of IQ (Hunt and Wittmann, 2008) and there is very high
correlations between IQ scores and either TIMSS or PISA scores.
 The conclusion from the various model is that impact of national IQ
scores on economic outcomes is that IQ provides another potential
measure of cognitive skills.
Conclusion and future research agenda
 This study highlights the crucial role of educational achievement in
understanding the vast international differences in economic wellbeing. It also suggests some key factors that account for the immense
international differences in educational achievement
 Regarding the future advances, it can include further institutional
variation and making more use of regional information. Some
unexplored issues, like, foreign languages, civic education and
information technology, student morale and commitment, nondisruptive behaviour, disciplinary climate and tardiness etc can also
be part of the analysis