The Knowledge Capital of Nations: Education and the Economics of Growth

Eric A. Hanushek and Ludger Woessmann

This book advances the simple argument that long-run economic growth is overwhelmingly a function of the cognitive skills of the population, or the “knowledge capital” of a nation. This hypothesis is subjected to rigorous economic and empirical analysis including extensive consideration of causal interpretations. The main results are remarkably robust, and equally applicable to developing and developed countries. Past empirical analysis and policy development based on school attainment of a nation’s population prove fragile, misleading, and rightfully questionable. For example, two largely unsolved historical mysteries – the “Latin American growth puzzle” and the “East Asian miracle” – are completely explained by consideration of knowledge capital. The central importance of cognitive skills allows one to calculate the economic benefits of improved skills for individual countries of the world.