Higher quality education associated with higher growth rates, study finds

According to André Portela, a professor at FGV EESP and the study’s coordinator, education is essential to the economic development of a country.
14 March 2023
Higher quality education associated with higher growth rates, study finds

The Center for Learning on Evaluation and Results for Brazil and Lusophone Africa at Fundação Getulio Vargas’ Sao Paulo School of Economics (FGV EESP CLEAR), supported by the Lemann Foundation, has just presented the results of a study on education and economic growth. Here are some of the main conclusions:

  • The quality of education is positively associated with higher rates of economic growth. A one-point increase in average international standardized test scores is linked to an increase in the per capita GDP growth rate of between 1 and 2.2 percentage points per year;
  • An increase in the quality of basic education in Brazilian municipalities is associated with significant gains in job creation among young people;
  • Human capital is considered a key factor in explaining differences in economic growth between countries;
  • Schooling is associated with productivity and it explains a large part of differences in workers’ income.

According to André Portela, a professor at FGV EESP and the study’s coordinator, education is essential to the economic development of a country. “The literature clearly demonstrates that the accumulation of human capital is one of the main engines of growth and the main channel for achieving people’s aspirations. The focus of this agenda should be on public investments in the quality of education and the formation of human capital, starting in early childhood,” he says.

The study sums up the main scientific evidence about the relationship between the quality of education and economic growth, including articles by respected authors in the field, such as Eric Hanushek, a researcher at Stanford University.

One major challenge in the literature is to find an appropriate way to measure the quality of teaching. The most widely used approach today is one that harnesses the results of standardized international tests, such as the Program for International Student Assessment (PISA) and Trends in International Mathematics and Science Study (TIMSS), to measure the educational attainment of students in each country. This approach is preferred over previously used strategies, such as measuring years of schooling, literacy rates or enrollment rates, because it incorporates an important fact into the analysis: education quality and quantity are not equivalent.

There is evidence in the specialized literature that it is precisely the quality of education (measured by standardized tests) that is related to economic growth, and not the quantity (measured by years of schooling). In addition, some studies indicate that the return on investment in education is greater in lower-income countries. Furthermore, improving students’ skills has greater potential for economic growth than merely ensuring access to education without improving skills. The highest returns accrue from a joint strategy: ensuring improved skills together with access to education would raise GDP by as much as 28% in lower-middle-income countries, 16% in upper-middle-income countries and less than 10% in high-income countries.

All the analyzed articles agree that raising students’ educational performance has positive impacts on countries’ economic growth. Studies indicate that an increase in students’ average score on standardized tests is associated with higher average annual growth. In the analyzed period, for each one-point standard deviation increase in test scores, there was an estimated average increase in per capita GDP growth of between 1 and 2.2 percentage points per year.

“For 40 years, Brazil has consistently grown less than its potential and below the world average. During this period, we made significant advances in access to education, but students’ learning did not improve at the same pace. Education quality – together with equity, especially racial – must be a priority for the country’s development and to allow Brazilians to fulfill their maximum potential,” says Daniel De Bonis, the director of knowledge, data and research at the Lemann Foundation.

Global comparisons show that Brazil still lags far behind developed countries and also many developing countries when it comes to educational performance. In the 2018 PISA mathematics and science exams, Brazil came close to the bottom of the international education ranking out of 79 participating countries, behind all developed countries and most developing countries, including Costa Rica, Mexico and Uruguay.

Furthermore, according to a study carried out by the World Bank, if Brazil maintains the same level of human capital growth (measured by the Human Capital Index) as in recent years, it will take a decade to reach Chile’s level and it will take three decades or more to catch up with countries like Portugal and Japan. This backwardness slows down economic growth considerably. The same World Bank study concludes that Brazil’s per capita GDP could be 66% higher if the country provided high-quality education and health care for its entire population.

The situation worsened further because of the COVID-19 pandemic. The 2021 results of Brazil’s Basic Education Assessment System (SAEB) show an unprecedented setback in students’ learning during the period of distance learning. According to these results, released by the Education Ministry’s National Institute for Educational Studies and Research (INEP), Brazil’s educational performance deteriorated in all analyzed subjects and in all parts of the basic education cycle, compared to the 2019 results. The indicators show that the average proficiency of 9th grade students in mathematics fell back to the 2015 levels, while their proficiency in Portuguese language returned to 2017 levels.

Even before the latest SAEB results, studies had already demonstrated a deterioration in learning in Brazil between 2019 and 2021. During this period, the proportion of children aged between six and seven years old unable to read and write increased more than 15 percentage points, equivalent to more than 1 million children (World Bank, 2022). In addition, it is estimated that Brazilian students only learned 27.5% of what they would have learned if they had had in-person classes in 2020. In addition to its direct effect on learning, the pandemic also raised the risk of students dropping out of school by more than 300% (Lichand, Doria, Leal-Neto and Fernandes, 2022). Results obtained by Hanushek and Woessmann (2020) indicate that losing two-thirds of a school year is associated with a reduction of US$4.2 trillion in the present value of Brazilian GDP for the remainder of this century, equivalent to 136% of GDP in 2019. In this context, the agenda for investment in education is even more urgent in Brazil.

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