The Quality of Education, Educational Institutions, and Cross-Country Differences in Human Capital Accumulation

Cross-country studies of education and economic prosperity often reach conflicting results when using growth rates as the measure of economic development. However, growth rates lack persistence over time and may not accurately measure long-term economic success over relatively short economic horizons. To overcome this potential specification problem, we estimate the relationship between key education variables and the capital to physical labor ratio. Using both cross-sectional and panel specifications, we find that both the primary-pupil–teacher ratio and decentralized education finance are associated with a larger capital to physical labor ratio. The relationship between human capital and expenditures, private education, and test scores are less robust.