Journal of Economic Literature: Vol. 46 No. 3 (September 2008)

Hanushek, Eric A., and Ludger Woessmann. 2008. "The Role of Cognitive Skills in Economic Development." Journal of Economic Literature, 46(3): 607-68.

DOI: 10.1257/jel.46.3.607

The role of improved schooling, a central part of most development strategies, has become controversial because expansion of school attainment has not guaranteed improved economic conditions. This paper reviews the role of cognitive skills in promoting economic well-being, with a particular focus on the role of school quality and quantity. It concludes that there is strong evidence that the cognitive skills of the population—rather than mere school attainment—are powerfully related to individual earnings, to the distribution of income, and to economic growth. New empirical results show the importance of both minimal and high level skills, the complementarity of skills and the quality of economic institutions, and the robustness of the relationship between skills and growth. International comparisons incorporating expanded data on cognitive skills reveal much larger skill deficits in developing countries than generally derived from just school enrollment and attainment. The magnitude of change needed makes clear that closing the economic gap with developed countries will require major structural changes in schooling institutions.

Hanushek, Eric A. (CESifo)
Woessmann, Ludger (Ifo Institute, U Munich and CESifo)

I21: Analysis of Education
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J31: Wage Level and Structure; Wage Differentials
O47: Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence