Education and growth: Is it quality or quantity that matters?

The literature on growth effects of education tend to focus on quantity measures of schooling, leading to some findings that cast doubt on the role of human capital in economic growth. This paper, following Hanushek and Kimko (2000), investigates the importance of schooling quality constructed from student performance on international tests in determining cross-country differences in growth rates. The results show that schooling quality is positively and significantly related to growth rates. This relationship is robust to alterations in the controlling variables and not driven by some East Asian countries. Comparison of alternative measures of schooling quality provides further support that quality measures based on cognitive skills are better measures of schooling quality than school inputs. In contrast, schooling quantity measures lose significance when quality measures are included. Finally, causality tests indicate the strong relationship between schooling quality and growth might be subject to reverse causality.