The Economics of International Differences in Educational Achievement

TLDR

International tests of educational achievement have become a key tool in economic research, offering advantages such as exploiting institutional variation, larger variation, revealing generality of results, testing heterogeneity, circumventing selection issues, and uncovering general‑equilibrium effects, but raising concerns about limited country observations, cross‑sectional data, and potential bias from unobserved country factors like culture. This chapter reviews the economic literature on international differences in educational achievement. It restricts itself to comparative analyses that are not possible within single countries and emphasizes studies that address key empirical identification issues. Quantitative input measures have little impact, whereas institutional structures and teaching force quality explain significant portions of international differences in achievement levels and equity, and these skill variations are strongly linked to individual labor‑market outcomes and cross‑country economic growth.

Abstract

An emerging economic literature over the past decade has made use of international tests of educational achievement to analyze the determinants and impacts of cognitive skills. The cross-country comparative approach provides a number of unique advantages over national studies: It can exploit institutional variation that does not exist within countries; draw on much larger variation than usually available within any country; reveal whether any result is country-specific or more general; test whether effects are systematically heterogeneous in different settings; circumvent selection issues that plague within-country identification by using system-level aggregated measures; and uncover general-equilibrium effects that often elude studies in a single country. The advantages come at the price of concerns about the limited number of country observations, the cross-sectional character of most available achievement data, and possible bias from unobserved country factors like culture. This chapter reviews the economic literature on international differences in educational achievement, restricting itself to comparative analyses that are not possible within single countries and placing particular emphasis on studies trying to address key issues of empirical identification. While quantitative input measures show little impact, several measures of institutional structures and of the quality of the teaching force can account for significant portions of the large international differences in the level and equity of student achievement. Variations in skills measured by the international tests are in turn strongly related to individual labor-market outcomes and, perhaps more importantly, to cross-country variations in economic growth.