What can be the best engine for economic growth if not education? Education is a fundamental human right, as stated in Article 26 of Universal Declaration of Human rights 'Everyone has the right to education' (UN General Assembly, 1948) From the human capital perspective, better-educated workers are likely to earn more because they tend to be more productive because of their education (McCowan & Unterhalter, 2015)
Education is a critical factor for increasing both individuals' earnings and economy of the countries. However, access to education does not boosts economic development, but the outcome of the educational quality does. It is worth mentioning that ‘quality’ has been given special attention in the SDGs by 2030. The Millennium Development Goals (MDGs) ‘Goal 2: Achieve universal primary education’ has been transformed to Sustainable Development Goals (SDGs) as ‘Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all’ (GEM report, 2016, p.6).
What is the measurement of educational quality? This question is always actual since education measurement is mixed (Hanushek & Woessmann, 2010). For example, it is a common understanding that year of schooling is a primary measurement to identify the economic return of education. However, this method has its drawback since it usually considers that formal schooling is a primary source of education. Non-schooling factors have considerable effect on learning outcomes, consequently affecting education quality.
If the years of schooling were the main identificatory of quality of education, then the whole world would be in the same equilibrium in terms of economic development. Obviously, a student in low-income countries, like Peru or Ghana, does not obtain the same amount of information in any year of schooling as a student in high-income countries like Finland or Korea. Nonetheless, using years of education as a measure presume that they are similar. Extensive evidence on cognitive skills and knowledge development shows that different factors out of schools such as family, friends and others have a powerful effect on student’s outcomes. If these factors are ignored, it will lead to measurement errors in growth analysis (Hanushek & Woessmann, 2010).
Hanushek and Kimko (2000) find a statistically and economically significant positive effect of educational quality on economic growth in 1960–1990, far higher than the association between the quantity of schooling and development, using data from international student achievement tests through 1991 to construct a measure of educational quality. Hanushek and Kimko stated that (2000) the fundamental importance of education on economic development is missed by neglecting the quality of education. According to their calculations, a one-standard-deviation increase in test performance would result in a one-percentage-point rise in annual growth (cited by Hanushek & Woessmann, 2010).
The authors discover that including education quality in the base specification (which only considers baseline income and school quality) increases the explained variation in GDP per capita among the thirty-one nations in their sample from 33% to 73%. Furthermore, the impact of 'quantity' of schooling is considerably decreased and largely insignificant. Adding the other components, on the other hand, leaves the benefits of cognitive skills almost untouched (Hanushek & Woessmann, 2010). Therefore, we can summarize that people's skills and knowledge should be considered the primary measurement of education, consequently affecting economic growth.
Now let's talk about the other influential factors on economic growth along with education. Education, just itself, cannot guarantee sustainable economic development no matter how good quality or how skilful and educated learners it can nurture. Easterly (2001) stated that in less developed countries where legal systems and functioning institutions for markets do not operate as they should, education may not impact economic development (cited by Hanushek & Woessmann, 2010). Moreover, Pritchett (2001) argues that because of problems in the institutional environment, the talents and skills of people can be applied in unproductive work in low-income countries (cited by Hanushek & Woessmann, 2010). According to Acemoglu (2001) (cited by Hanushek & Woessmann, 2010), the economy's institutional framework significantly impacts economic growth. Open economy to foreign trade and the security of property rights are the most prevalent and powerful, guaranteeing the economy's development. For instance, educational quality positively impacts economic growth, albeit at a low level in closed economies (0.9 per SD); still, it rises to 2.5 per SD in open economies (Hanushek & Woessmann, 2010). Economic quality requires both educational quality and institutional environment where the two factors and other supplemental factors reinforce each other.
Educational enrolment does not ensure the positive effect of education on the economy unless students achieve a positive learning outcome (GEM, 2016). Based on the evidence of different authors mentioned above, we can conclude that students' knowledge and skills can be considered the quality of education, which is more important for economic development than just quantitative measurement of schooling.
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