Schooling over Time and across Countries

Education is a valuable asset, not just for individuals but for countries as well: More-educated individuals earn more on average, and richer countries are typically populated by more-educated individuals.

The latter observation is often viewed as a justification for helping poor countries build schools in the hope that increased schooling causes higher economic growth. Economists Mark Bils and Peter Klenow investigated this question in a well-known article.See Mark Bils and Peter J. Klenow’s 2000 article “Does Schooling Cause Growth?” in the American Economic Review. They found that, even though schooling matters for growth, cross-country differences in schooling explain less than a third of the cross-country differences in growth. Part of the reason why schooling does not cause a lot of growth is that the causality may go in the opposite direction: It may be growth that causes schooling to increase.

In this blog post, I present data pertaining to the relationship between growth and schooling. I consider a set of three rich countries (the U.S., France and the United Kingdom) and three poor countries (Benin, Malawi and Niger). I selected these countries because, for each of them, there exist available data on schooling and gross domestic product (GDP), from 1960 to 2010.There are other countries for which this is the case, but it is not the case for all rich and poor countries. To gauge the relative income of these countries, consider this: In 2010, France’s real GDP per capita was 67% of that of the U.S., and the United Kingdom’s was 80% of that of the U.S. In contrast, Benin’s real GDP per capita was 2% of that of the U.S., and Malawi and Niger both had 1% the real GDP per capita of the U.S.

Schooling and Economic Growth: Rich vs. Poor Countries

From 1960 to 2010, years of schooling increased in all of these countries, and real GDP per capita increased in all but one. The key message in this blog post is conveyed in the table, which shows the growth of schooling and real GDP per capita during this period.

For example, the table shows that average years of schooling in the U.S. increased by 51% between 1960 and 2010. Meanwhile, U.S. real GDP per capita increased by 177% (that is, nearly tripling its 1960 size) during this period.

The first observation is that GDP growth was noticeably higher in the rich countries than in the poor countries. In the rich countries, real GDP per capita more than doubled (that is, it increased by more than 100%), while in the poor countries, real GDP per capita less than doubled and even declined in one case. The second observation is that growth in schooling, measured by the average years of schooling in the country, is considerably higher in the poor countries than in the rich ones. In each of the poor countries, schooling more than tripled (increasing by more than 200%), while in two of the rich countries, schooling did not even double.

Poor Countries’ Faster Schooling Growth, Slower GDP Growth

It is important to note that schooling started from a lower level in the poor countries, with less than a year of schooling in 1960 in each of the three poor countries versus four to nine years in the rich countries. The key puzzling observation, however, is that poor countries lost ground relative to the rich countries in terms of real GDP per capita (their GDP grew at a slower pace), while they were catching up in terms of schooling (their schooling grew faster). This is an illustration of the finding by Bils and Klenow: Schooling causes little growth, to the point that the countries where schooling grew faster ended up with less economic growth than the countries where schooling didn’t grow as much.

One explanation for this phenomenon is provided by Diego Restuccia and Guillaume Vandenbroucke.See Diego Restuccia and Guillaume Vandenbroucke’s 2014 article “Explaining Educational Attainment across Countries and over Time” in the Review of Economic Dynamics. If schooling has a “consumption value” instead of only an investment value, then schooling resembles any other consumption: It becomes less enjoyable when one has more in the first place. If that is the case, then it shouldn’t be surprising that poor countries accumulate more schooling, not because it makes them more productive, but because of its consumption value.

Notes

1. See Mark Bils and Peter J. Klenow’s 2000 article “Does Schooling Cause Growth?” in the American Economic Review.
2. There are other countries for which this is the case, but it is not the case for all rich and poor countries.
3. See Diego Restuccia and Guillaume Vandenbroucke’s 2014 article “Explaining Educational Attainment across Countries and over Time” in the Review of Economic Dynamics.