The Economic Benefit of Educational Reform in the European Union

We use estimates of the effect of educational achievement—measured by international student achievement tests—on economic growth to simulate the impact of improved achievement for individual EU countries and the EU as a whole. We calculate the present value of improvements in GDP over the life expectancy of a child born today (i.e. until 2090), using a discount rate of 3%. Under plausible assumptions, the present values of the gains from educational reforms for the EU aggregate add up to astounding amounts on the three considered reform scenarios: €35 trillion (288% of current GDP) for an average increase of ¼ standard deviations; €95 trillion (785% of current GDP) for bringing each nation up to the top-performer Finland; and €25 trillion (211% of current GDP) for reaching the official EU benchmark of <15% low-achievers in basic skills by 2020. Seen relative to the present value of GDP over the same period, these gains amount to an average increase in GDP of 4.5–16.8%. The results suggest that EU policies aimed at school attainment goals are misplaced without assurances that student achievement also improves. In fact, economic cohesion within the EU appears to be highly dependent on fostering more equality in achievement across countries. (JEL codes: I20, O40, J24, H40)