The same pattern of results is preserved when we ignore any variation between world regions by including five regional dummies (column (3) of Table 4.1).<sup>46</sup> That is, even when considering just the variation that exists within each region, educational quality is significantly related to economic growth, with a coefficient estimate reduced from 1.98 to 1.55.

One of the most important fundamental determinants of economic growth discussed in the recent literature is the institutional framework of the economy (see Section 4.5 below for details). The most common and powerful measures of the institutional framework used in empirical work are the openness of the economy to international trade and the security of property rights.<sup>47</sup> When we add these two institutional variables to our model, they are jointly highly significant (column (4) of Table 4.1). But the positive effect of educational quality on economic growth is very robust to the inclusion of these controls, albeit slightly reduced in magnitude to 1.26.

Other potential determinants of economic growth often discussed in the literature are fertility and geography. However, when we add the total fertility rate and common geographical proxies, such as latitude or the fraction of the land area of a country that is located within the geographic tropics, to the specification reported in column (4) of Table 4.1, neither of these additional variables is statistically significantly associated with economic growth. Furthermore, none of the other results, in particular for educational quality, are qualitatively affected.

An important issue is whether the role of educational quality in the process of economic development differs between developing and developed countries. In Table 4.2, we divide the sample of countries into two groups in two different ways. First, in columns (5) and (6), we subdivide the sample into OECD countries and non-OECD countries. Results are remarkably similar, with the point estimate of the effect of educational quality slightly larger in non-OECD countries. However, the effect of educational quality on economic growth does not differ significantly between the two groups of 46 The regions are East Asia, South Asia, Latin America, Middle East and North Africa, Sub-Saharan Africa, and the industrial countries.

47 The proxy for openness used here is the fraction of years between 1960 and 1998 that a country was classified as having an economy open to international trade, based on five factors including tariffs, quotas, exchange rate controls, export controls, and whether or not a socialist economy (cf. Sachs and Warner (1995)). The proxy for security of property rights is an index of the protection against expropriation risk, averaged over 1985-1995, from Political Risk Services (a private company which assesses the risk that investments will be expropriated in different countries), ranging from 0 to 10 (high figures corresponding to low risk), as used by Acemoglu, Johnson, and Robinson (2001) and provided in McArthur and Sachs (2001). This measure of the risk of confiscation and forced nationalization of property is often used as a summary variable for institutional quality, and similar data were first used in this framework by Knack and Keefer (1995).

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