Human capital for growth: rethinking the contribution of education from comparative perspective

• In Event: Financing education: an overview of the landscape

Proposal

This paper utilizes comparative perspective to analyze the role of education in economic growth in countries with high participation in tertiary education.
1. Comparative analysis shows that in some countries (like Russia and some other post-socialist countries) the expansion of higher education does not lead to the acceleration of the economic growth and labor productivity. It contradicts classical human capital theory assumptions (Becker, Schultz).
2. Even though human capital perspective remains dominant in literature (Tan, 2014) and claims the causal effect of the expansion of formal education on economic growth (see Klees 2016), there is extensive literature criticizing this statement (See Komatsu and Rappleye 2017, Tan 2014, Klees 2016).
3. Hanushek and Woessmann (for instance, 2008) stressed that the enrollment and years of education are not enough. They insisted that test scores (cognitive skills) better explained economic impact and, thus, prove ultimate “utility” of education. However comparative analysis of the test scores’ impact on growth in the early 21st century shows that the cognitive skills become less connected to economic growth (Komatsu and Rappleye (2017))
4. Does it mean that education becomes, in general, less important for economic growth? If not cognitive skills (Hanushek and Woesmann) and not the simple measure of “quantity” of education (coverage) – then what in education could be the key to economic growth? Is there anything at all in education relevant for the vital task of increasing the pace of economic development?
5. One possible explanation is that non-cognitive abilities could explain the difference. We can interpret Heckman (as well as elaborate further on his ideas) and suggest that this is the case.
6. However, the comparative analysis also shows that the countries with high participation (Marginson 2018) sometimes have weak institutes. This may be interpreted in the sense that “education is not the case – improve the society first” ((not a direct citation) see Klees, 2016). Indeed the problem of job places becomes central. If there is not enough job-places for well qualified labor force – what can education do?
7. Comparative analysis also demonstrates that even in most developed countries with well-established system of institutions (including labor market) the pace of increase in coverage of tertiary education (presumably, it is the education of a good quality) – grows faster than the pace of economic growth (OECD, 2017).
8. Hence, the decrease in global economic growth in general, as well as the problem of weakening of the connections between economic growth and growth in education coverage – cannot be sufficiently explained by referring to the issue of “bad institutions”.
9. Drawing of James Heckman idea of “non-cognitive skills” and John.W. Meyer’s concept of “expanded actorhood” we elaborate the theoretical model (and illustrate it empirically from comparative perspective), which suggests new principles and mechanisms for the connections between education, economic growth, and institutions.
10. We argue that the pace of societal changes, empowered by revolutionary technological inventions like artificial intelligence, internet-based platforms and networks - has become so fast that it requires national states, companies and individuals to develop principally new capability in order to progress in economic growth. This capability goes beyond simple following the existing institutional systems – it rather implies the ability to transform them, to create new institutions seen not simply as “increase in efficiency”, but as “a new system of social interactions”, with “new identities”, “new values”.
11. What can be the contribution of the education system to the economic growth in this new reality?
First, it implies the ability of individuals to deal with weak institutes (most important issue for countries like Russia).
Second, it also implies the ability to transform and change practically all institutions – even the most “efficient”, respected and well established (this may be relevant to all countries with high participation in tertiary education).
Third, it poses the question about how does tertiary education (the type of education most rapidly expanding) contribute to human capital in terms of non-cognitive skills. The well-known assumption by James Heckman has been that early years are essential in terms of non-cognitive skills. However, there are theoretical models (for instance that from Activity Theory (stemming from Lev Vygotsky), arguing for the huge potential for positive transformations in the older stages of personality development)


Conclusion.
In the context of new socio-economic reality, it is necessary to revisit the issue of contribution of education to economic growth.
• The mission of education is to produce such human capital, that will not only become a resource for industrial economic growth, but the driving force of socio-economic development.
• "Human Capital 2.0.“: the primary goal is not to efficiently adapt to existing institutions, but to transform them.

Authors

• Pavel Sorokin, National Research University Higher School of Economics

• Isak Froumin, Institute of Education HSE