| This paper is an econometric analysis of the relationship between education and labor productivity. While economists agree that human capital is an important factor in determining productivity, it has been difficult to measure. Traditionally, the number of years of schooling has been used to measure education, but this fails to account for the quality of that education. The Organization for Economic Cooperation and Development (OECD) implemented the Programme for International Student Assessment (PISA) in 2000 as a cross-country test of cognitive ability. This paper seeks to determine if PISA may be a more useful measure of skill level than the number of years of education. The regression analysis results indicate that PISA is, indeed, a useful metric for identifying human capital. It also raises important questions about academic achievement. According to its findings, the PISA scores of the highest achieving students appear to be most closely associated with higher productivity. A somewhat harder to explain finding was that wider gaps between high and low PISA groups (i.e. higher inequality) had a positive association with productivity. This presents interesting questions for how policymakers should approach education, particularly with respect to equality. |
