Literacy & Economic Growth

Statistics Canada & The Economist:

TO WHAT extent is economic growth driven by the acquisition of �human capital�? Many economists have pursued the answer over the past 20 years, but without great success. Despite building and rebuilding elaborate growth models, they have failed to prove that better education and training significantly raises a country's long-term growth. Recently, though, a Canadian team made a breakthrough. It found that, if you measure actual skills rather than educational qualifications, human capital becomes a strong predictor of economic growth.

The team identified a clear and significant association between investments in human capital in each period and a country's subsequent growth and labour productivity. Specifically, a rise of 1% in literacy scores relative to the international average is associated with an eventual 2.5% relative rise in labour productivity and a 1.5% rise in GDP per head.

These are much clearer effects than those found in previous studies. In the three countries in the study where human capital improved the fastest between the older and the younger generations (Belgium, Finland and Italy), growth in output per worker rose much faster than average between 1960 and 1995, while in those with least improvement in skills (New Zealand, Sweden and the United States), growth was slower.

Statistics Canada: International Adult Literacy Survey: 656K PDF

Posted by Jim Zellmer at September 8, 2004 9:19 PM
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