NCPA - National Center for Policy Analysis

Higher Grades Lead to Higher GDP

January 23, 2014

There is a link between educational achievement and national prosperity, say Eric Hanushek and Paul E. Peterson, senior fellows at the Hoover Institution.

Hanushek and Peterson looked at achievement tests given to students across 50 countries and determined that there was a connection between those students' scores and their respective countries' economic growth:

  • Between 1960 and 2009, the incredibly rapid growth in Korea, Taiwan, Singapore and Hong Kong is explained by the high test scores by the students in those countries. In fact, economic growth in those countries was nearly 2 percent higher each year than it would have been had the students only demonstrated average academic achievement.
  • Those countries with poor student scores -- South Africa, Argentina, the Philippines and Peru -- saw growth that was 2 percent less than it would have been had their test scores been at the world average.

Raising American student test scores up to the level of Canadian students, the authors estimate, would lead to a dramatic increase in economic growth.

  • That additional growth would be worth $77 trillion over the next 80 years, equivalent to adding 20 percent to the paycheck of every worker.
  • Moreover, if U.S. math scores alone rose by 40 points (which is what it would take to reach Canadian levels) gross domestic product growth would rise by three-fourths of 1 percent per year.

To raise these scores, schools need to look at how they are spending money rather than how much money they are spending.

  • A look at two decades of educational spending in the United States, between 1990 and 2010, gives no indication that changes in spending per pupil impacted student performance.
  • Florida, on the other hand, improved its academic performance dramatically with hardly any changes made to the amount of spending per pupil.
  • More school choice, accountability and market-based teacher compensation can increase achievement without requiring greater spending.

Source: Eric Hanushek and Paul E. Peterson, "Higher Grades, Higher GDP," Hoover Institution, January 21, 2014.


Browse more articles on Education Issues