Ifo Institute for Economic Research at the University of Munich

“Education and Training: The European Economy’s Best Hope”Munich Economic Summit 2012 – Introduction to Panel 1:

Peering over the Hedge: How Do the Neighbors Do It? Ludger WoessmannUniversity of Munich and Ifo Institute

11th Munich Economic SummitMunich, 3 May 2012

• “If custom and law define what is educationally allowable within a nation, the educational systems beyond one’s national boundaries suggest what is educationally possible.” – Arthur W. Foshay, a pioneer in international testing, in 1962

on the first pilot study of international student achievement

• Countries differ widely in their education policies and outcomesHuge opportunity to learn what works and what does not

• Look at the whole sample of countries to see whether countries with certain policies perform systematically different – Rather than being exceptions to the rule

• All the following statements derive from such systematic econometric cross-country research

Learning from Cross-Country Analyses

1. Educational achievement is the key to economic prosperity

2. “Throwing money at schools” is not the answer

3. Focus on institutions, incentives, teacher quality

a) Achievement level 1) Competition

2) Accountability

3) Autonomy

b) Equal opportunities 1) Early childhood education

2) De-tracking

Learning from Cross-Country Analyses

Added-variable plot of regression of average annual growth rate of real GDP per capita 1960-2000 on

initial level of GDP per capita, initial average years of schooling and average student achievement test scores

(mean of the unconditional variables added to each axis). Based on Hanushek and Woessmann (JEL 2008).

Educational Achievement and Economic Growth

• Research on determinants of economic growth – Key: direct measures of cognitive skills– Use available estimates of their growth impact to simulate

how future GDPs would evolve under school reforms

• Gains from improving skills are enormous: – Present value of long-run aggregate gains for EU:

1) €21 trillion for reaching the ET 2020 benchmark of less than 15% low-achievers in basic skills by 2020

2) €32 trillion for average increase of 25 PISA points

3) €87 trillion for bringing each nation’s achievement to level of top-performing Finland

Focus on educational outcomes, not just attainment

The Cost of Low Educational Achievement in the EU

Gains from bringing each nation’s educational achievement to the Finnish level, billion Euro:

Discounted value of future increases in GDP until 2090, expressed in billion Euro (PPP). Source: Hanushek and Woessmann (CESifoEStud 2012).

0

2,500

5,000

7,500

10,000

12,500

15,000

Ital

y

Fra

nce

Ger

man

y

Uni

ted

Kin

gdom

Spa

in

Rom

ania

Pol

and

Gre

ece

Por

tuga

l

Sw

eden

Net

herl

ands

Bel

gium

Aus

tria

Bul

gari

a

Cze

ch R

epub

lic

Hun

gary

Den

mar

k

Irel

and

Slo

vaki

a

Lit

huan

ia

Cyp

rus

Lux

embo

urg

Slo

veni

a

Lat

via

Mal

ta

Est

onia

Fin

land

The Cost of Low Educational Achievement in the EU

Spending and math achievement of EU countries in PISA 2009:

Own depiction based on PISA 2009 data. Regression line of best fit (without three outliers).

What Is the Link between Resources and Outcomes?

Class size and math achievement of EU countries in PISA 2009:

Own depiction based on PISA 2009 data. Regression line of best fit (without three outliers).

What Is the Link between Resources and Outcomes?

• Incentives – Best way to use investments efficiently and effectively

is to ensure that everyone in the system has incentives to focus on improving student outcomes

Institutional framework: provides the incentive schemes that create better student outcomes – Competition and choice– Accountability – Autonomy

Focus on Institutions, Incentives, and Teacher Quality

PISA math test score

(relative to lowest

category)

0%

60%

55%

100%

33.9

70.9

0.0

36.9

0

10

20

30

40

50

60

70

80

Average share of government

fundingShare of privately operated schools

Funding, Operation and Student Outcomes

Source: Woessmann et al. (2009); see also West and Woessmann (EJ 2010).

TIMSS math test

score (relative to

lowest category)

NoYes

No

Yes

55.5

76.2

23.7

0.00

10

20

30

40

50

60

70

80

Central exams

School autonomy over teacher salaries

External Exams, Autonomy and Student Outcomes

Source: Woessmann (2005); see also Hanushek, Link and Woessmann (NBER 2011).

Raising pre-primary

duration by 1 year

Tracking 4 years

later

Raising pre-primary enrolment from 60 to

100%

- 4.3

-1.3

- 4.4

Education Policy and Inequality of Opportunity

Source: Schuetz, Ursprung and Woessmann (Kyklos 2008).

28.8

25.6

23.1

20.8

17.716.8

14.0

8.3

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

England

Germany

USA

Austria

OECD

Switzerland

Finland

France

Effect of family background on student achievement

Canada

France

Germany

Iceland

Latvia

CanadaCzech Rep.

Czech Rep.

France

Germany

Greece

Greece

Hong Kong

Hong Kong

HungaryHungary

IcelandItaly

Italy

Latvia

Netherlands

Netherlands

New Zealand

New Zealand

Norway

Norway

Russian Fed.

Russian Fed.

Slovak Rep.Slovak Rep.

Sweden

Sweden

Turkey

Turkey

United States

United States

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

PIRLS (Primary school) PISA 2003 (Secondary school)

Standard Deviation

Early trackingNo early tracking

3/3

3/3

Tracking and Inequality

Source: Hanushek and Woessmann (EJ 2006).

Canada

France

Germany

Iceland

Latvia

CanadaCzech Rep.

Czech Rep.

France

Germany

Greece

Greece

Hong Kong

Hong Kong

HungaryHungary

IcelandItaly

Italy

Latvia

Netherlands

Netherlands

New Zealand

New Zealand

Norway

Norway

Russian Fed.

Russian Fed.

Slovak Rep.Slovak Rep.

Sweden

Sweden

Turkey

Turkey

United States

United States

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

PIRLS (Primary school) PISA 2003 (Secondary school)

Standard Deviation

1

2

3

4

1

2

3

4

5

6 Early trackingNo early tracking

Change:

1. Germany 0.712. Greece 0.303. Czech Rep. 0.254. Italy 0.225. Sweden 0.216. Latvia 0.127. Netherlands 0.118. France 0.099. Russian Fed. 0.0810. Hungary 0.0411. Iceland -0.0712. Slovak Rep. -0.0813. Hong Kong -0.1314. Norway -0.1415. United States -0.2716. Canada -0.3217. New Zealand -0.5018. Turkey -0.63

Tracking and Inequality

Source: Hanushek and Woessmann (EJ 2006).

1. Educational achievement is the key to economic prosperity

2. “Throwing money at schools” is not the answer

3. Focus on institutions, incentives, teacher quality

a) Achievement level 1) Competition

2) Accountability

3) Autonomy

b) Equal opportunities 1) Early childhood education

2) De-tracking

Learning from Cross-Country Analyses