A new macroeconomic measure of human capital exploiting PISA and PIAAC: Linking education policies to productivity

Publication Name
A new macroeconomic measure of human capital exploiting PISA and PIAAC: Linking education policies to productivity
Volume, number, page
Working Papers No. 1709, 31
Year of Publication
2022
Author(s)
EGERT Balázs
DE LA MAISONNEUVE Christine
TURNER David
Editor(s)
OECD Economics Department
Organization Name
Organisation for Economic Co-operation and Development
Acronym
OECD
Publisher
OECD Economics Department
City
Paris
Country of Publication
France
Full Date
2022
Considered Countries
OECD countries
Category
Reports
Keyword(s)
human capital
PISA
PIAAC
education policies
productivity
OECD countries
Abstract
This paper provides a new measure of human capital using PISA and PIAAC surveys, and mean years of schooling. The new measure is a cohort-weighted average of past PISA scores (representing the quality of education) of the working age population and the corresponding mean years of schooling (representing the quantity of education). In contrast to the existing literature, the relative weights of each component are not imposed or calibrated but directly estimated. The paper finds that the elasticity of the stock of human capital with respect to the quality of education is three to four times larger than for the quantity of education. The new measure has a strong link to productivity with the potential for productivity gains being much greater from improvements in the quality than quantity component of human capital. The magnitude of these potential gains in MFP is comparable to a similarly standardised improvement in product market regulation, but the effects materialise with much longer lags. The paper demonstrates through the example of pre-primary education, how to simulate the impact of a particular reform to education policy on human capital and productivity.
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