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The Knowledge Capital of NationsEducation and the Economics of Growth$
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Eric A. Hanushek and Ludger Woessmann

Print publication date: 2015

Print ISBN-13: 9780262029179

Published to MIT Press Scholarship Online: September 2015

DOI: 10.7551/mitpress/9780262029179.001.0001

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Knowledge Capital and Growth

Knowledge Capital and Growth

The Main Results

(p.39) 3 Knowledge Capital and Growth
The Knowledge Capital of Nations

Eric A. Hanushek

Ludger Woessmann

The MIT Press

The measure of knowledge capital is introduced in empirical growth modelling. The knowledge capital measure turns out to be very closely related to economic growth rates in cross-country growth regressions. Simple growth models considering knowledge capital (in addition to years of schooling and initial income levels) account for three quarters of the international variation in growth rates – in stark contrast to models excluding cognitive skills that can account for just one quarter of the variation. The empirical results are remarkably stable in the face of alternative specifications, varying samples, and alternative measures of cognitive skills, demonstrating a robustness uncommon to most cross-country growth modelling. Moreover, knowledge capital has a dramatic impact on growth rates: one standard deviation higher cognitive skills of a country’s workforce is associated with approximately two percentage points higher annual growth in per-capita GDP. It is also true that having both top performers (rocket scientists) and a broad base of proficiency (education for all) is important for growth.

Keywords:   Knowledge capital, Robustness, Sensitivity, Cross-country growth, Rocket scientists, Education for all

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