Is schooling the same as learning? – The impact of the learning-adjusted years of schooling on growth in a dynamic panel data framework

Abstract

• We propose a new database on the learning-adjusted years of schooling (LAYS) over the period 1995–2015. • We analyze the impact of the LAYS on economic growth in a dynamic panel data framework using system GMM estimation. • Our findings suggest that the LAYS have a significant positive association with growth. • The LAYS appear to be a more robust predictor of economic outcome than measures of only school quantity. • The LAYS have a larger association with growth in countries with weak institutions. Recent research shows that schooling is not the same as learning. Still, the mean school years are the standard metric of education-based human capital. We propose a new database on the learning-adjusted years of schooling (LAYS) over the period 1995–2015 by using the World Bank (2018) methodology. The LAYS combine measures of school quantity and school quality into a single measure. Using a dynamic panel data framework, we find that the LAYS have a positive association with growth and appear to be a more robust predictor of economic outcome than the traditional measures of education such as the mean school years. We also investigate the interrelationship between institutional quality and the LAYS. Our evidence suggests that human capital and ‘good’ institutions serve as substitutes in the growth process, meaning that the positive association of the LAYS with growth is smaller in countries where institutions are already strong than in countries with poorly functioning institutions. Our results have important policy implications, since investments in human capital and institutional quality are both costly measures, especially for developing countries.