Human capital investment has been seen as a primary tool for producing inclusive growth. But the research support for this has not been entirely clear. Countries that have expanded their schooling have not necessarily seen the positive economic gains they had hoped for. Similarly the beneficial distributional effects are difficult to document. The central explanation for both appears directly related to measurement issues. When skills are properly measured, many of the issues of growth, development, and distribution become much clearer. The argument made here is that most of the prior problems emanate from bad measures of skill differences across countries. When properly measured by the knowledge capital of nations—i.e., the aggregate cognitive skills of the workforce—there is a clear and well-identified impact of skills on growth.
