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# **A. The Growth of Education Attainment**<sup>**1**</sup>

Education attainment levels increased rapidly in most developing countries since the 1950s; Schultz (1988). While Mexico also partook in that development, earlier studies had identified a significant lag in its education indicators. Londonto (1996), for example, points to an "education deficit", according to which the Latin American countries in general, and Mexico in particular, have approximately two years less of education than would be expected for their level of development (as measured by per-capita incomes). Elias (1992) finds that education was the most important source of labor quality improvement in Latin America between 1950 and 1970, but points out that such improvements did not take place to the same extent in Mexico. This changed dramatically in the 1980s, as shown in the scatter diagram below.

Figure 1 describes the relation between income per capita and average years of schooling of the population aged 15 years or more, using stacked cross-country data for the years 1960, 1970, 1980, 1985 and 1990.2 Mexico's level of education

- 'The following discussion primarily focuses on the evolution of education attainment levels as measured by years of schooling, on the assumption that the quality of education has remained more or less constant. Although it is of great interest in this context, information on the quality of education in Mexico is very scarce. The most common measures of "quality" are based on input measures, (e.g., real expenditures on education per student, student-teacher ratios, or class-density variables) or secondary performance variables (e.g., evolution of repetition and desertion rates). On the basis of these measures, Mexico also has performed comparatively well over the last few decades. These measures are not very satisfactory, however, as they reflect many other influences in addition to the quality of instruction as reflected in the acquisition of knowledge and skills. A comprehensive education survey was conducted in Mexico in 1995 as part of the Third International Mathematics and Science Study (TIMMS) that may have yielded important data to permit correlating the preceding education sector characteristics with academic achievement levels to obtain a better understanding of the determinants of education quality in Mexico. That data set has not been made publicly available.

- 2 The scatter diagram in Figure 1 is based on 317 observations from five different years. The observations pertaining to Mexico, ordered by date, are as follows:

Ave. Schooling (years) Ln (GDP per capita; 1980 US$) 1960 2.76 7.95 1970 3.68 8.29 1980 4.77 8.71 1985 5.20 8.63 1990 6.72 8.67 The trend line represents the least square regression line given by: S = -13.17 + 2.28 Ln(GDPcap) Adj. R<sup>2</sup> _=_ 0.68 (-18.7) (26.0) t-values in parentheses

- The application of Ramsey's RESET test to this regression equation failed to detect a specification error; unlike with the alternative specification of type: S = a + bX + cX<sup>2</sup> . However, coefficient stability tests indicated that the trend line is not constant across decades. This is reflected in the upward drift of the coefficients associated with the dummies in the following equation:

- S = -13.20 + 2.21 Ln(GDPcap) + 0.023DUM70 + 0.525DUM80 + 0.833DUM 85 + 0.997DUM90 (-19.0) (25.4) (0.1) (1.7) (3.0) (3.6) Adj. R<sup>2</sup> = 0.70, t-values in parentheses