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Evidence on the relationship between education, skills and economic growth in low-income countries: a systematic review

What do we want to know and why?

Investing in education and skills has long been considered a key driver of economic growth both in the academic literature and by practitioners. Despite this widespread belief that the investment in human capital development is a key determinant of economic growth, the empirical estimates especially focusing on low-income countries (LICs) are less than conclusive. Together with the added complication that the measurement of the outcome of the investment in education and skills is not straightforward, causing researchers to use a range of proxies for human capital, it is not surprising that there is uncertainty in the policy arena as to the most effective type of education or skills within the LIC context. This systematic review aims to provide comparable, reliable and verifiable estimates of the effect of education on economic growth, controlling for study heterogeneity in terms of the measure of human capital used, growth measurement applied and country grouping.

Our objective is to address the impact of education and skills on economic growth empirically with a view to providing a meta-synthesis of the empirical evidence on the direct effects of human capital investment on growth in LICs. The report also aims to highlight policy conclusions and point out potential avenues for further research. The review focuses on the growth impacts of education and skills in LICs, but we also provide evidence for a larger set of countries for comparative purposes.

What did we find?

We report that the investment in human capital does have a positive and genuine effect on growth in LICs. This aggregate result is obtained after controlling for growth measures, education and skills measurement, country type and estimation type. There was a positive direct effect of education and skills on growth in LICs between education and skills measurement types. Very few indirect effects are reported in the papers identified and therefore it was difficult to use the meta-analysis to draw any conclusions about the pathways proposed.

What are the implications?

This systematic review suggests the widely held belief that investing in education and skills promotes economic growth in LICs is correct in general. It also identifies many gaps in the research field which, if filled, would enable a more effective policy response by international donors and governments in LICs. The most important issue is that of the education and skills measurements used. These are often chosen by academics in terms of data availability rather than usefulness as a measure for policy intervention. The human capital measures used tend to be measures of the inputs into the education process, for example enrolment rates as a measure of engagement, and educational expenditure as a measure of costs, rather than measures of learning. Therefore a discussion between academics and policy-makers as to what they mean by education and skills and how best to measure these may be a fruitful line of enquiry in terms of making the academic literature in this field more useful to policy-makers.

How did we get these results?

We used 22 key search terms and 43 LIC names to search in 19 electronic databases. The search yielded 3,842 unique studies, which were first screened on the basis of title and abstract. This initial screening generated 218 studies for the critical evaluation stage. The critical evaluation of the full text and the handsearch conducted at this stage using the PIOS (population–independent variable –outcome –study design) framework led to inclusion of 57 studies: 51 empirical papers and six theoretical papers. Rereading the 57 studies to focus on LICs reduced the sample to 39 papers: 33 empirical and 6 theoretical. The included studies have similar characteristics to the full-sample with respect to publication date and publication type.

The six theoretical papers identified were used to provide additional support to the theoretical framework developed. The 33 empirical papers were synthesised using a meta-analysis approach. The method of meta-analysis was utilised to derive verifiable estimates of the direct effects of human capital on growth by grouping (nesting) studies on the basis of coherent measurement of education and skills and growth. The meta-analysis results are presented as random-effect weighted averages. The statistical significance of the random-effect estimates (REEs) was verified through precision-effect tests (PETs) that detect ‘genuine’ effects beyond bias.

This report should be cited as: Hawkes D, Ugur M (2012) Evidence on the relationship between education, skills and economic growth in low-income countries: a systematic review. London: EPPI-Centre, Social Science Research Unit, Institute of Education, University of London.

ISBN: 978-1-907345-32-6

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