I hear consistent talk of the need to invest in higher education in low- and middle-income countries, so I was interested to see Eric Hanushek’s paper asking if more higher education will improve economic growth, which is forthcoming in the Oxford Review of Economic Policy.
As Hanushek says, “one does not get electrical engineers and computer scientists without investing in higher education.” And yet, his regression results (growth regressed on cognitive skills, non-tertiary schooling levels, and tertiary schooling levels) suggest no significant association between higher tertiary and economic growth. “These results suggest the possibility that a number of countries are following a misplaced investment strategy if their goal is to improve economic growth. They might be better off spending on the margin to improve basic skills in earlier schooling (where they can be subsequently built upon in university) than simply expanding colleges and universities with existing basic skills.”
One country does show a strong positive relationship between years of tertiary and economic growth: the USA. He argues that the high quality of US universities and their ability to attract high skilled migrants, many of whom stay to work in the US, may explain that result.
Tertiary may be important for many reasons, including the formation of institutions and future leaders. But this pass at the data don’t suggest a strong growth argument.
What do you think?