The Influence of Educational Quality

on Economic Prosperity

Carlos Rymer
Research and Quantitative Methods
MPA-Environmental Science and Policy
Columbia University
May 2009
 For most of the last half-century, governments have believed that by increasing
their expenditures on educational quantity (i.e. how much participation in
education they can achieve as a percentage of the population), they can ensure high
levels of economic growth. While some research on existing data has made the
connection for some countries, it does not fully explain the relationship. The
established consensus that policies designed to increase educational expenditures
fuel economic prosperity has left out the role that educational quality also plays in
producing citizens that can compete in a globalized, competitive world economy.
This study looked at data from 85 countries of mixed GDP levels to assess what
role educational quality plays on levels of economic prosperity. Regression analysis
shows that educational quantity by itself does not sufficiently explain economic
prosperity, while quantity combined with quality has a significant correlation to
economic prosperity, supporting the hypothesis that educational quantity by itself
is not enough to ensure that a country can develop economically.

Introduction

S
ince the emergence of sense, education expenditures are more

development literature in the about increasing resources in order to

1960’s, countries have been accommodate more students. The goal

designing educational policies aimed at has largely been to ensure that students

preparing citizens to better contribute to stay in school for as long as possible

the country’s well-being. In doing so, until they are ready to enter the labor

much attention has been given to market. Among countries where

education in quantity terms. In this economic growth has coincided with

1
educational policies based on this they have the skills necessary to meet

notion, a consensus has grown that in the needs of organizations or

fact educational expenditures to government agencies offering more

increase quantity pays off in terms of competitive goods and services.

economic prosperity. In this study, the link between

Recently, however, research has educational quality and economic

shown that while expenditures on prosperity is assessed. While much

increasing resources to accommodate research has focused on the relationship

more students is important, it is not between educational quantity and

enough to ensure that students become economic prosperity, this study

high-value citizens who can add social analyzed the effect that educational

and economic value to a given country. quality also has on economic prosperity,

Particularly in a more competitive and particularly in the last two decades, a

globalized world economy, it has period in which the world economy has

become more noticeable the idea that been much more globalized and

educational quality contributes competitive than ever before. First,

significantly to societal well-being. existing leading literature is reviewed to

Citizens are no longer expected to see where much of it has been focused

simply complete school; increasingly, over the last decade. Then, statistical

they are expected to demonstrate that analyses are carried out to a) determine
2
the relationship of educational quantity was possible to determine whether or

and quality to economic prosperity not educational quality is in fact a major

among countries separately and b) player in a country’s potential for

determine the combined effect of economic and social prosperity.

educational quantity and quality on

economic prosperity. By doing this, it

Literature Review

T
here is a broad consensus at educational institutions is directly

on the fact that well- related to the prosperity of the private

designed educational policy sector and consequently to human well-

can effectively spur economic being (Wolf, 2004). Researchers refer to

prosperity. This consensus puts forth the commitment to education by

that developed economies largely governments of economically

depend on the availability of well- prosperous countries in pointing out

trained, educated individuals who can that education is fundamental to

add innovative and problem-solving economic growth. In turn, this has led

value to firms. In addition, the breadth various countries to adopt policies that

and depth of research and development increase the participation rate in higher
3
education as a way of increasing Nonetheless, recent research

economic growth. suggests that simply spending more on

In the political sense, education education may not necessarily translate

refers to the preparation for life, into economic growth. This may be

particularly for individual fulfillment, particularly true in cases where higher

civic participation, and the workplace, wages can also increase business costs

elements that can be associated with without providing much more output.

economic growth and democracy. The number of years in school, it has

Education must aim to prepare been shown, is not sufficient to

individuals for the workplace by guarantee an improved citizenry that is

providing them with skills necessary to capable of improving human well-being

produce goods and services, but also across a country. As a result, a focus on

help individuals grow personally to quantity, especially through target-

enhance society’s social capital (Winch, driven policy, can have significant

2002). In this sense, education is the negative effects on quality (Wolf, 2004).

means by which individuals in society In turn, this can lead to societal losses as

are better prepared to fuel improved resources are spent on keeping people

human well-being through higher- in schools but not on building human

paying jobs, innovation, and the capital to drive economic growth.

provision of social benefits.

4
 A 2007 study conducted by the Cognitive skills have not just

World Bank shows that while been strongly associated with economic

educational quantity is significant, such growth, but also to income earnings

significance pales in comparison to across a population and therefore

educational quality. The authors agree income distribution. International

that a focus on access to education by comparisons have shown that there is a

governments has achieved important significant gap in educational quality

results, but they also show that it is between developed and developing

“ultimately the degree to which countries, making matters worse when

schooling fosters cognitive skills and you only consider educational

facilitates the acquisition of professional attainment in developing countries as a

skills that matters to development” measure of educational success. In the

(Hanushek and Wobmann, 2007). The long term, this suggests that

study looked at countries with test governments must begin to focus more

scores as a proxy to test the correlation on restructuring educational institutions

between educational quantity and to improve quality in addition to

economic prosperity among several increasing educational access

dozen countries. (Hanushek and Wobmann, 2007).

5
 The significance of educational educational policies. Today’s

quality, measured by the outcome that knowledge-based economies have been

students should be prepared for a successful in achieving economic

competitive and knowledge-oriented prosperity because they’ve been able to

world economy, can also be shown in train a workforce in diverse fields that

studies that relate literacy to health are foreign to less prosperous countries

outcomes. For example, a 2006 study on and therefore represent a competitive

low-income populations with diabetes advantage (Warrington, 2008).

showed that literacy mediated the With some developing countries

relationship between access to closing the gap on educational quality

education and diabetes control. In this with some developed countries, the

case, knowledge of key health terms led impact educational quality can have on

to an increase in human well-being competitiveness has become more

because citizens were capable of using noticeable (Bernasek, 2005). With

cognitive skills to detect and control educational quality becoming more

diabetes (Schillinger et. al, 2006). important in the years ahead,

The trend in the world economy governments will have to begin

towards increased competitiveness has designing policies to achieve greater

made it even more urgent for quality to results than simply school attainment.

be a key focus of government

6
 Methodology

T
his study looks at existing quantity and quality) and the dependent

data from the United variable (economic prosperity).

Nations Educational, Additionally, ANOVA tests were

Scientific, and Cultural Organization for performed on each independent

85 countries. The data sets (Figure 2) variable with the dependent variable to

used measure 1) educational quantity, 2) find the level of significance of any

educational quality, and 3) economic association. Finally, an ANOVA test was

prosperity. Figure 1 below shows the performed using the combined effects of

measures used to predict these educational quantity and quality.

variables. The hypothesis tested in this study was

the following:
Figure 1. Variable Predictors
Variable Measure
Educational quality plays a significant
Educational Government
Quantity Expenditures/GDP role in a nation’s economic prosperity.
Educational Teacher-Student Ratio
Quality This hypothesis is intended to
Economic GDP/Capita
Prosperity help fill the gap in information about
The data were analyzed using
educational quality and economic
linear regression to determine the
prosperity by reinforcing recent
strength of association between the two
research that attempted to answer the
independent variables (educational
same question using other data.

7
 Results
independent variables graphed along the

T
he linear regression
dependent variable (see Appendix for
performed on these variables
other figures).
showed that for the 85
Figure 3. Education Spending Linear
countries chosen in this study, 1) Regression

educational quantity has a weak

1 00 0 00

correlation with economic prosperity (r =

7 50 0 0

GDP/Cap
0.153); 2) educational quality has a

5 00 0 0












relatively strong correlation with




GDP/Cap =
3073.66 * SpendingGDP



2 50 0 0













economic prosperity (r = 0.373), and 3)




























































0

2 .5 5 .0 7 .5 1 0.0 1 2.5
educational quantity and quality combine
Spending/GDP

to have a stronger effect on economic

Figure 4. Student-Teacher Ratio
prosperity (r = 0.405)using Pearson’s r. Linear Regression

Moreover, both educational

1 00 0 00

quality and the combined effect of the

750 0 0
GDP/Ca p

two independent variables are

500 0 0

significantly correlated to economic

GDP/Cap = 769.68 * TeacherStudentRatio
250 0 0


































prosperity (F < 0.001). Figures 3 and 4 0

1 0.0 2 0.0 30.0 4 0.0

show the linear regression running Teacher-Student Ratio

through the data for each of the

8
 Discussion
research has shown that educational

quantity, measured by school attainment

T
he results reinforce
and participation, does in fact correlate
conclusions made from
with economic prosperity suggests that
recent research showing that
government educational expenditure as
educational quality plays a significant
percentage of GDP is not a good measure
role in achieving high economic
of educational quantity.
prosperity. While previous research
Nonetheless, the analysis
focused on test scores available in a
performed clearly shows that educational
handful of countries, this study focused
quality, as measured by the student-
on more universally available data to
teacher ratio, does strongly correlate with
further close the gap in statistical analysis
economic prosperity. Further research
showing the link between educational
should use better predictors of
quality and economic prosperity.
educational quantity to better assess its
The linear regression performed
effect on economic prosperity when
on the data suggest that educational
combined with measures of educational
quantity, measured by government
quality. Such research would help refine
educational expenditure as a percentage
these results and reinforce the tested
of GDP, is not a good predictor of
hypothesis.
economic prosperity. The fact that other
9
 Conclusions

T
he consensus held by most

governments regarding
1. Educational quantity by itself
educational policy should
does not adequately predict
begin to change in the coming decades.
the effect that government
While it is true that increasing access to
educational policies have on
education is important and has been the
economic prosperity;
focus of many governments, it is not
2. Educational quality is a strong
enough to ensure that education plays a
and significant predictor of a
pivotal role in the economic development
nation’s economic prosperity;
of a nation.
and
New research now suggests that
3. Educational quality must be
there is enough evidence supporting the
considered as part of the
hypothesis that educational quality plays
package of government
a more significant role than educational
educational policies if the goal
quantity in promoting economic
is achieving high economic
development. The results of this prosperity.

assessment support that hypothesis and

lead to the following conclusions:

10
 References
Bernasek, Anna. 2005. What’s the Return
on Education? The New York Times.
December 11, 2005. Available at:
http://www.nytimes.com/2005/12/11/busi
ness/yourmoney/11view.html?_r=1&scp=
7&sq=education%20and%20economic%20
growth&st=cse
Hanushek, Eric A. and Wobmann,
Ludger. 2007. Education Quality and
Economic Growth. World Bank.
Hanushek, Eric A. and Wobmann,
Ludger. 2007. The Role of School
Improvement in Economic Development.
World Bank.
and Health Outcomes? A Study of a Low-
Income Population with Diabetes. Public
Health Reports 121: 245-254.
Warrington, Molly. 2008. Decisions and
transitions: meeting the needs of the
‘knowledge economy.’ Government and
Policy 26: 924-937.
Winch, Christopher. The Economic Aims of
Education. Journal of Philosophy of
Education 36 (1): 101-117.
Wolf, Alison. 2004. Education and
Economic Performance: Simplistic Theories
and Their Policy Consequences. Oxford
Review of Economic Policy 20 (2): 315-
333.

Schillinger, Dean et al. 2006. Does Literacy

Mediate the Relationship Between Education

Appendix
Figure 2. Original Data
Country Student-Teacher Ratio GDP/Cap Spending/GDP
Andorra 10.9 $43,504 1.7
Anguilla 12.5 $18,007 4.0
Armenia 8.7 $3,057 2.7
Aruba 14.2 $25,253 4.8
Austria 12.1 $44,652 5.4
Azerbaijan 8.4 $3,691 2.3
Barbados 15.9 $12,687 6.9
Belarus 8.9 $4,621 5.9
Belgium 10.0 $43,470 6.0
11
 Bermuda 7.0 $86,450 2.0
Bhutan 23.8 $1,982 7.0
Botswana 13.6 $5,739 9.7
Brazil 15.3 $6,852 4.5
British Virgin Islands 8.5 $51,273 3.1
Bulgaria 11.8 $5,178 4.5
Cameroon 16.2 $1,111 3.1
Cape Verde 23.1 $2,689 6.7
Cayman Islands 9.5 $57,222 2.8
Chad 34.2 $692 1.9
Chile 24.5 $9,854 3.4
Colombia 26.2 $3,648 4.8
Cuba 11.3 $4,641 9.8
Cyprus 11.1 $27,465 6.3
Czech Republic 9.7 $16,881 4.3
Dominican Republic 26.7 $4,202 3.6
El Salvador 27.6 $2,971 2.7
Eritrea 47.6 $271 5.3
Finland 14.5 $46,371 6.3
France 10.6 $40,090 5.7
Germany 15.0 $40,162 4.5
Ghana 21.5 $647 5.4
Greece 8.6 $28,111 3.5
Guyana 17.9 $1,435 8.1
Hungary 11.1 $13,777 5.5
Iceland 11.6 $62,033 7.6
Indonesia 11.1 $1,869 2.9
Iran, Islamic Republic of 18.8 $4,072 4.7
Israel 11.6 $23,383 6.3
Italy 10.8 $35,585 4.4
Jamaica 18.5 $4,147 5.3
Japan 12.0 $34,225 3.5
Kazakhstan 11.0 $6,753 2.3
Kenya 31.6 $786 7.3
Kuwait 9.7 $38,574 4.7
Kyrgyzstan 13.4 $704 4.9
Lao 26.5 $711 2.3
Lebanon 7.9 $6,011 2.6
Lesotho 26.6 $797 13.8
Lithuania 9.9 $118,040 5.0
Madagascar 21.6 $108,217 3.2
Mauritania 31.0 $18,227 2.3
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 Mauritius 17.2 $874 4.4
Mexico 16.4 $5,846 5.5
Mozambique 24.9 $8,149 5.0
Netherlands 13.1 $2,217 5.2
New Zealand 14.4 $46,669 6.5
Oman 17.7 $15,546 3.5
Peru 16.7 $3,880 2.7
Philippines 33.1 $1,639 2.5
Poland 12.8 $11,008 5.5
Portugal 7.1 $20,990 5.4
Qatar 12.1 $75,978 3.3
Republic of Korea 16.9 $19,841 4.4
Republic of Moldova 13.7 $1,158 7.2
Romania 14.2 $7,523 3.5
Russian Federation 9.5 $9,050 3.8
Rwanda 26.3 $354 3.4
Saint Kitts and Nevis 9.9 $10,447 9.7
Saint Lucia 17.4 $5,810 5.5
St. Vincent and Grenadines 17.9 $4,660 8.0
Sao Tome and Principe 21.7 $912 5.1
Senegal 26.4 $908 3.9
Slovakia 13.3 $13,702 5.8
Slovenia 11.6 $22,936 5.3
South Africa 32.9 $5,826 4.2
Spain 10.2 $32,451 7.6
Swaziland 16.8 $2,520 7.1
Sweden 9.4 $49,873 3.5
Tajikistan 16.4 $555 4.2
Tunisia 17.2 $3,390 7.2
Ukraine 11.6 $3,055 6.1
United Arab Emirates 11.9 $43,709 1.4
United Kingdom 14.6 $45,549 5.5
United States 15.2 $45,047 5.3
Uruguay 16.9 $6,913 2.8

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 Descriptive Statistics
Std.
N Minimum Maximum Mean Deviation
Statistic Statistic Statistic Statistic Std. Error Statistic
Teacher-Student Ratio 85 7.0 47.6 16.352 .8214 7.5725
GDP/Cap 85 271 118040 19432.65 2653.319 24462.389
Spending/GDP 85 1.4 13.8 4.916 .2283 2.1050
Valid N (listwise) 85

Model Summary for Educational Expenditure/GDP

Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .153(a) .023 .012 24319.271
a Predictors: (Constant), Spending/GDP

ANOVA(b) for Educational Expenditure/GDP

Model Sum of Squares df Mean Square F Sig.
1 Regression 1177875679.364 1 1177875679.364 1.992 .162(a)
Residual 49088435154.037 83 591426929.567
Total 50266310833.401 84
a Predictors: (Constant), Spending/GDP
b Dependent Variable: GDP/Cap

Coefficients(a) for Educational Expenditure/GDP

Unstandardized Standardized
Coefficients Coefficients t Sig.

Model B Std. Error Beta B Std. Error

1 (Constant) 28177.773 6734.846 4.184 .000
Spending/GDP -1778.906 1260.532 -.153 -1.411 .162
a Dependent Variable: GDP/Cap

Model Summary for Student-Teacher Ratio

Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .373(a) .139 .129 22830.055
a Predictors: (Constant), Teacher-Student Ratio

ANOVA(b) for Student-Teacher Ratio

Model Sum of Squares df Mean Square F Sig.
1 Regression 7005765340.896 1 7005765340.896 13.441 .000(a)
Residual 43260545492.505 83 521211391.476
Total 50266310833.401 84

14
 a Predictors: (Constant), Teacher-Student Ratio
b Dependent Variable: GDP/Cap

Coefficients(a) for Student-Teacher Ratio

Unstandardized Standardized
Coefficients Coefficients t Sig.

Model B Std. Error Beta B Std. Error

1 (Constant) 39153.207 5921.580 6.612 .000
Teacher-Student Ratio -1206.002 328.948 -.373 -3.666 .000
a Dependent Variable: GDP/Cap

Model Summary for Combined Effect

Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .405(a) .164 .143 22642.188
a Predictors: (Constant), Spending/GDP, Teacher-Student Ratio

ANOVA(b) for Combined Effect

Model Sum of Squares df Mean Square F Sig.
1 Regression 8227480936.735 2 4113740468.367 8.024 .001(a)
Residual 42038829896.666 82 512668657.276
Total 50266310833.401 84
a Predictors: (Constant), Spending/GDP, Teacher-Student Ratio
b Dependent Variable: GDP/Cap

Coefficients(a) for Combined Effect

Unstandardized Standardized
Coefficients Coefficients t Sig.

Model B Std. Error Beta B Std. Error

1 (Constant) 48122.010 8261.065 5.825 .000
Teacher-Student Ratio -1209.804 326.250 -.375 -3.708 .000
Spending/GDP -1811.761 1173.638 -.156 -1.544 .127
a Dependent Variable: GDP/Cap

Correlations
Teacher-
Student Ratio GDP/Cap Spending/GDP
Teacher-Student Ratio Pearson Correlation 1 -.373(**) -.008
Sig. (2-tailed) .000 .945
N 85 85 85
GDP/Cap Pearson Correlation -.373(**) 1 -.153
Sig. (2-tailed) .000 .162
N 85 85 85

15
 Spending/GDP Pearson Correlation -.008 -.153 1
Sig. (2-tailed) .945 .162
N 85 85 85
** Correlation is significant at the 0.01 level (2-tailed).

Correlations

Control Variables GDP/Cap Spending/GDP

Teacher-Student Ratio GDP/Cap Correlation 1.000 -.168
Significance (2-tailed) . .127
df 0 82
Spending/GDP Correlation -.168 1.000
Significance (2-tailed) .127 .
df 82 0

Correlations
Teacher-
Control Variables GDP/Cap Student Ratio
Spending/GDP GDP/Cap Correlation 1.000 -.379
Significance (2-tailed) . .000
df 0 82
Teacher-Student Ratio Correlation -.379 1.000
Significance (2-tailed) .000 .
df 82 0

16