Ifo Institute for Economic Research at the University of Munich “Education and Training: The European Economy’s Best Hope” Munich Economic Summit 2012 – Introduction to Panel 1: Peering over the Hedge: How Do the Neighbors Do It? Ludger Woessmann University of Munich and Ifo Institute 11 th Munich Economic Summit Munich, 3 May 2012

“If custom and law define what is educationally allowable within a nation, the educational systems beyond one’s national boundaries suggest what is educationally possible.” –Arthur W. Foshay, a pioneer in international testing, in 1962 on the first pilot study of international student achievement Countries differ widely in their education policies and outcomes  Huge opportunity to learn what works and what does not Look at the whole sample of countries to see whether countries with certain policies perform systematically different –Rather than being exceptions to the rule All the following statements derive from such systematic econometric cross-country research Learning from Cross-Country Analyses

1.Educational achievement is the key to economic prosperity 2.“Throwing money at schools” is not the answer 3.Focus on institutions, incentives, teacher quality a) Achievement level 1)Competition 2)Accountability 3)Autonomy b) Equal opportunities 1)Early childhood education 2)De-tracking Learning from Cross-Country Analyses

Added-variable plot of regression of average annual growth rate of real GDP per capita on initial level of GDP per capita, initial average years of schooling and average student achievement test scores (mean of the unconditional variables added to each axis). Based on Hanushek and Woessmann (JEL 2008). Educational Achievement and Economic Growth

Research on determinants of economic growth –Key: direct measures of cognitive skills –Use available estimates of their growth impact to simulate how future GDPs would evolve under school reforms Gains from improving skills are enormous: –Present value of long-run aggregate gains for EU: 1)€21 trillion for reaching the ET 2020 benchmark of less than 15% low-achievers in basic skills by )€32 trillion for average increase of 25 PISA points 3)€87 trillion for bringing each nation’s achievement to level of top-performing Finland  Focus on educational outcomes, not just attainment The Cost of Low Educational Achievement in the EU

Gains from bringing each nation’s educational achievement to the Finnish level, billion Euro: Discounted value of future increases in GDP until 2090, expressed in billion Euro (PPP). Source: Hanushek and Woessmann (CESifoEStud 2012). The Cost of Low Educational Achievement in the EU

Spending and math achievement of EU countries in PISA 2009: Own depiction based on PISA 2009 data. Regression line of best fit (without three outliers). What Is the Link between Resources and Outcomes?

Class size and math achievement of EU countries in PISA 2009: Own depiction based on PISA 2009 data. Regression line of best fit (without three outliers). What Is the Link between Resources and Outcomes?

Incentives –Best way to use investments efficiently and effectively is to ensure that everyone in the system has incentives to focus on improving student outcomes  Institutional framework: provides the incentive schemes that create better student outcomes –Competition and choice –Accountability –Autonomy Focus on Institutions, Incentives, and Teacher Quality

PISA math test score (relative to lowest category) Average share of government funding Share of privately operated schools Funding, Operation and Student Outcomes Source: Woessmann et al. (2009); see also West and Woessmann (EJ 2010).

TIMSS math test score (relative to lowest category) External Exams, Autonomy and Student Outcomes Source: Woessmann (2005); see also Hanushek, Link and Woessmann (NBER 2011).

Raising pre-primary duration by 1 year Tracking 4 years later Raising pre-primary enrolment from 60 to 100% Education Policy and Inequality of Opportunity Source: Schuetz, Ursprung and Woessmann (Kyklos 2008) England Germany USA Austria OECD Switzerland Finland France Effect of family background on student achievement

Early tracking No early tracking 3/3 Tracking and Inequality Source: Hanushek and Woessmann (EJ 2006).

Early tracking No early tracking Change: 1.Germany Greece Czech Rep Italy Sweden Latvia Netherlands France Russian Fed Hungary Iceland Slovak Rep Hong Kong Norway United States Canada New Zealand Turkey-0.63 Tracking and Inequality Source: Hanushek and Woessmann (EJ 2006).

1.Educational achievement is the key to economic prosperity 2.“Throwing money at schools” is not the answer 3.Focus on institutions, incentives, teacher quality a) Achievement level 1)Competition 2)Accountability 3)Autonomy b) Equal opportunities 1)Early childhood education 2)De-tracking Learning from Cross-Country Analyses