1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

A new macroeconomic measure of human capital exploiting PISA and PIAAC: Linking education policies to productivity

This paper provides a new measure of human capital using PISA and PIAAC surveys, and mean years of schooling. The new measure is a cohort-weighted average of past PISA scores (representing the quality of education) of the working age population and the corresponding mean years of schooling (representing the quantity of education). In contrast to the existing literature, the relative weights of each component are not imposed or calibrated but directly estimated. The paper finds that the elasticity of the stock of human capital with respect to the quality of education is three to four times larger than for the quantity of education. The new measure has a strong link to productivity with the potential for productivity gains being much greater from improvements in the quality than quantity component of human capital. The magnitude of these potential gains in MFP is comparable to a similarly standardised improvement in product market regulation, but the effects materialise with much longer lags. The paper demonstrates through the example of pre-primary education, how to simulate the impact of a particular reform to education policy on human capital and productivity.

English

Keywords: PIAAC, human capital, OECD countries, education policies, productivity, PISA
JEL: I20: Health, Education, and Welfare / Education and Research Institutions / Education and Research Institutions: General; I28: Health, Education, and Welfare / Education and Research Institutions / Education: Government Policy; I26: Health, Education, and Welfare / Education and Research Institutions / Returns to Education; E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity; I25: Health, Education, and Welfare / Education and Research Institutions / Education and Economic Development
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