Investing in education and human capital is an important ingredient for growth … and that’s how

A classroom in Lyon, October 15, 2021.

A classroom in Lyon, October 15, 2021.

©PHILIPPE DESMAZES / AFP

Key factor

OECD economist Balazs Egert proposes a new measure of human capital. This indicator, which is defined by the sum of the knowledge, skills and personal characteristics of individuals, is a determining factor in growth.

Atlantico: How do you define human capital and why do you think it is important to study and re-evaluate its measure? What is the purpose of this new measure?

Balazs Egert: Human capital is broadly defined as knowledge, skills, and other personal characteristics that make people productive. It is acquired at school but also throughout professional life. Human capital is a determinant of growth, but it is difficult to measure. It is often approximated by the average number of years of schooling. However, the average years of schooling represent the amount of education, not its quality. The same length of schooling does not mean the same amount of knowledge and skills if the quality of education differs between countries. The most recent empirical literature has combined quantity (such as the average years of schooling) and quality (student test scores) into a single measure of human capital. However, the calculation often imposes an arbitrary and equal weight on both components. Another weakness of many studies is that they are based on contemporary measures that often relate to students assessed at age 15, which is unlikely to be representative of the skills of the general working-age population. The aim of our new measure is to solve these problems.

Using data from the OECD PISA program, you have developed a new aggregate measure of human capital stock. How did you proceed? What’s new in your approach and what are the potential differences?

To link the economic growth of an economy to its human capital, we need a measure that represents the skills of the entire workforce. The results of the tests for adults (OECD PIAAC survey), which measure the skills of the entire working-age population, would be a good indicator of the quality of human capital. However, the PIAAC survey has no time series and its national coverage is limited. In contrast, student test scores (OECD PISA), which measure student proficiency at age 15, have a time series and much longer national coverage, but are only related to high school students. Therefore, we establish a strong link between the PIAAC adult test scores, on the one hand, and the PISA test scores of students who took the student test at age 15 (and the average number of years of schooling), on the other. We then calculate the new measure as a cohort-weighted average of the previous PISA scores (representing the quality of education) of the working-age population and the average number of years of schooling corresponding (representing the number of education). The novelty of our approach is that, contrary to the existing literature, we empirically estimate the relative weights of the quality and quantity components.

What is the situation in France in your new measure of human capital?

The new measure of France’s human capital stock is broadly equivalent to the OECD average, but lower than that of Germany, Canada, Japan, Korea, and the Nordic countries (see chart below). The ranking of France according to our new measure is consistent with the ranking according to PIAAC and PISA. Our human capital stock increased 2.4% between 1987 and 2020.

What are your comments on the link between newly measured human capital and economic growth?

The new human capital measure shows a strong positive relationship with productivity and per capita income levels in OECD countries, suggesting that improvements in human capital are accompanied by gains in productivity and macroeconomic output. In addition, our analysis suggests that the potential for long-term productivity gains is much greater through improvements in the qualitative than quantitative component of human capital. However, the delays in materializing these gains are very long, especially since it takes almost five decades for a lasting improvement in student skills to fully translate into an improvement in the skills of the entire working-age population. .

How can your work help you better understand the effect of education policy reforms on productivity and per capita income? Is early childhood education just a starting point for further study?

An interesting feature of our new human capital measure is that it allows us to assess the effect of education policy reforms on productivity and per capita income. Any educational policy, quantitatively measurable by an indicator and linked to changes in student test scores, can then be linked to the new measure of human capital and therefore productivity. In fact, our current work uses early childhood education to demonstrate the effect of education policy reforms, but in our future work we will explore a large number of educational policies, including accountability and accountability, school autonomy, monitoring of students and teachers. qualifications. We will also look at how adult education and development policies influence, through human capital, macroeconomic performance.

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