# **The Role of School Improvement in Economic Development**

By Eric A. Hanushek and Ludger Wößmann

|**1.** **Introduction........................................................................................................................................ 1**|
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|**2.** **Individual Returns to Education and Economic Inequality........................................................... 5**|
|2.1 Impacts of School Attainment on Individual Incomes.................................................................. 5|
|2.2 Impacts of Educational Quality on Individual Incomes—Developed Countries.......................... 6<br>|
|2.3 Impacts of Educational Quality on Individual Incomes—Developing Countries....................... 11|
|2.4 Evidence from the International Adult Literacy Survey............................................................. 14|
|2.5 Causality...................................................................................................................................... 16|
|2.6 Income Distribution .................................................................................................................... 17|
|**3.** **Quantity of Schooling and Economic Growth............................................................................... 20**|
|3.1 Results of Initial Cross-country Growth Regressions................................................................. 20|
|3.2 More Recent Evidence on the Effects of Levels of and Growth in Years of Schooling............. 22|
|**4.** **Quality of Education and Economic Growth ................................................................................ 25**|
|4.1 A Review of the Basic Results.................................................................................................... 25|
|4.2 Issues of Endogeneity ................................................................................................................. 29|
|4.3 Some New Evidence ................................................................................................................... 31|
|4.4 Distribution of Educational Quality and Economic Growth....................................................... 38|
|4.5 Institutions, Education and Growth............................................................................................. 40<br>|
|4.6 The Implications of Improved Quality........................................................................................ 43|
|Appendix: Data on Quality of Education........................................................................................... 47|
|**5.** **Where Does the Developing World Stand?.................................................................................... 51**|
|5.1 Lack of Quantity of Schooling.................................................................................................... 51|
|5.2 Lack of Quality of Education...................................................................................................... 52|
|5.3 The Size of the Task at Hand: Schooling Quantity and Educational Quality Combined ........... 55|
|**6.** **Educational Spending and Student Outcomes .............................................................................. 59**|
|6.1 Cross-country Evidence on Resources........................................................................................ 60|
|6.2 Within-country Evidence – Developed Countries ...................................................................... 63|
|6.3 Within-country Evidence – Developing Countries..................................................................... 66|
|6.4 Is There a Minimum Resource Requirement? ............................................................................ 67|
|**7.** **Schooling Institutions and Educational Quality............................................................................ 68**|
|7.1 Choice and Competition in Developing Countries ..................................................................... 68|
|7.2 Evidence on Autonomy of Schools............................................................................................. 70|
|7.3 School Accountability................................................................................................................. 71|
|7.4 Summary of How to Improve the Quality of Education............................................................. 74|
|**8.** **Conclusion......................................................................................................................................... 76**|
|**References.............................................................................................................................................. 80**|