Education and human capital

Education shows great resilience to shocks—labor demand for highly skilled workers has remained high in all kinds of economic conditions. Public policy for education and human capital includes increasing the economic and social returns on education, fostering greater educational attainment, encouraging social and economic mobility, and providing vocational education, training, and lifelong learning.

  • Labor market consequences of the college boom around the world Updated

    Better information on university quality may reduce underemployment and overeducation in developing countries

    As the number of secondary school graduates rises, many developing countries expand the supply of public and private universities or face pressure to do so. However, several factors point to the need for caution, including weak job markets, low-quality university programs, and job–education mismatches. More university graduates in this context could exacerbate unemployment, underemployment, and overeducation of professionals. Whether governments should regulate the quantity or quality of university programs, however, depends on the specific combination of factors in each country.
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  • What is the nature and extent of student–university mismatch?

    Students do worse if their abilities fail to match the requirements of the institutions where they matriculate

    A growing body of research has begun to examine the match between student ability and university quality. Initial research focused on overmatch—where students are lower attaining than their college peers. However, more recently, attention has turned to undermatch, where students attend institutions with lower attaining peers. Both have been shown to matter for student outcomes; while in theory overmatch could be desirable, there is evidence that overmatched students are less likely to graduate college. Undermatched students, meanwhile, have been shown to experience lower graduate earnings.
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  • Central exit exams improve student outcomes

    External school leaving exams raise student achievement and improve how grades are understood in the labor market

    Ludger Woessmann, January 2018
    Reaching the policy goal of improving student achieve­ment by adding resources to the school system has often proven elusive. By contrast, ample evidence indicates that central exit exams constitute an important feature of a school system’s institutional framework, which can hold students, teachers, schools, and administrators accountable for student outcomes. While critics point to issues such as teaching test-only skills, which may leave students ill-prepared for the real world, the evidence does not bear this out. Overall, central exams are related to better student achievement, favorable labor market outcomes, and higher economic growth.
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  • Do higher levels of education and skills in an area benefit wider society? Updated

    Education benefits individuals, but the societal benefits are likely even greater

    John V. Winters, December 2018
    Formal schooling increases earnings and provides other individual benefits. However, societal benefits of education may exceed individual benefits. Research finds that higher average education levels in an area are correlated with higher earnings, even for local residents with minimal education. Science, technology, engineering, and mathematics (STEM) graduates appear to generate especially strong external effects, due to their role in stimulating innovation and economic growth. Several strategies to test for causality find human capital externalities do exist.
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  • Does homeownership affect education outcomes?

    Homeownership facilitates investment in human capital, though direct effects on education outcomes are unclear

    Stephen Whelan, April 2017
    Homeownership has important economic implications for society and individuals. At the social level is the greater civic engagement that homeowners tend to exhibit, while at the individual level an important outcome associated with housing tenure is better education outcomes, especially for children. The causal impact of tenure, in particular of homeownership, on education is mediated through a range of mechanisms. Evidence for the direct benefit of homeownership itself is less clear, though positive impacts associated with homeownership are stronger for low-income households.
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  • Is the return to education the same for everybody?

    While a four-year college degree is financially beneficial for most people, it is not necessarily the best option for everyone

    Douglas Webber, October 2014
    A postsecondary degree is often held up as the one sure path to financial success. But is that true regardless of institutional quality, discipline studied, or individual characteristics? Is a college degree always worth the cost? Students deciding whether to invest in college and what field to study may be making the most important financial decision of their lives. The return to education varies greatly by institutional quality, discipline, and individual characteristics. Estimating the returns for as many options as possible, and making that information as transparent as possible, are paramount in helping prospective students make the best decision.
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  • Language proficiency and immigrants’ economic integration

    It is vital to measure language proficiency well, as it crucially determines immigrants’ earnings

    Over recent decades, Western countries have admitted many immigrants from non-traditional regions (e.g. Philippines, India, China), which has coincided with poor economic integration. Language proficiency is an important determinant of economic integration; in addition to being a component of human capital, it plays a key role in facilitating the transmission of other components of human capital. Examining the strengths and weaknesses of objective and subjective measures of language proficiency is crucial for good integration policy, as is understanding the relationship between these measures and earnings, a key indicator of economic integration.
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  • The role of preschool in reducing inequality

    Preschool improves child outcomes, especially for disadvantaged children

    Jane Waldfogel, December 2015
    Children from disadvantaged families have lower levels of school readiness when they enter school than do children from more advantaged families. Many countries have tried to reduce this inequality through publicly provided preschool. Evidence on the potential of these programs to reduce inequality in child development is now quite strong. Long-term studies of large publicly funded programs in Europe and Latin America, and newer studies on state and local prekindergarten programs implemented more recently in the US, find that the programs do improve outcomes for young children, particularly for those from disadvantaged families.
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