Cognitive skills and economic performance: evidence from the recent international student assessment tests

Abstract

This paper examines the empirical relationship between the quality of educational attainment and economic growth. It uses country scores from the recent international student assessment tests as a proxy for education quality and cognitive skills of the labor force along with data on education quantity (schooling) and several control variables. The student assessment data set includes two widely used international tests, PISA and TIMSS, spanning the periods 2000-2015, and 1995-2015, respectively. Empirical results from OLS and IV estimations indicate that cognitive skills component of human capital has a robust positive effect on growth performance whereas the impact of average years of schooling, after conditioning on test scores, is statistically insignificant. Results suggest that to improve the quality of human capital stock and spur economic growth, countries should focus more on developing national education policies designed to enhance students' cognitive skills rather than merely increasing the number of schools.