Study: Literacy more important than years of education in developing countries

By Вen Li

In a study sure to irk student leaders and others in the post-secondary education lobby, Statistics Canada revealed that literacy level has a greater effect on productivity than the number of years of education.

“Literacy scores, human capital and growth across fourteen [Organisation for Economic Co-operative and Development countries”, released on June 24, states in its summary: “The central result of the paper is that direct measures of human capital based on literacy scores outperform measures based on years of schooling in growth regressions. The results indicate that, overall, human capital indicators based on literacy scores have a positive and significant effect on the transitory growth path, and on the long run levels of GDP per capita and labour productivity.”

Study authors Serge Coulombe, Jean-François Tremblay, and Sylvie Marchand constructed a synthetic time series of the literacy level of workers entering the workforce over the 1960-1995 period. They used data from the 1994 International Adult Literacy Survey as an indicator of 14 0ECD countries’ investment in human capital, and compared that indicator with academic enrolment and achievement as alternative indicators.

By tracking how GDP changed in relation to human capital measures at the time new workers entered the workforce, the authors found that literacy scores had a greater positive correlation to GDP than did other indicators, which had positive, null, or negative correlations.

One implication of the results is that ignoring other potential social or indirect economic benefits derived from investments in secondary and post-secondary education, investments in increasing literacy are more efficient.

The study also indicated that investments in women’s literacy had a slightly greater effect on productivity than did investments in men’s literacy. It explains:

“First, to the extent that there were initially social barriers to the education of women, investment in the literacy of women may have been provided to relatively high ability individuals… Second, the rate of return on women’s human capital investment may have been high because the initial level of literacy was relatively low among women… Third, men and women may have comparative advantages in certain types of occupations, if for example, men tend to be relatively more productive in manual occupations that require more physical strength. If this is the case, women may have a comparative advantage in occupations that require high levels of human capital. As a result, the optimal stock of human capital would be higher for women than it is for men.”

The authors’ also speculated that the gender discrepency resulted from unequal work performed by men and women, and from data inconsistencies due to the different indicators used to measure achievement and literacy in various countries.

The study cautions, however, that while the correlation between literacy and productivity they observed occurred in all nations studied, the effect is more pronounced on developing nations.

“The key economic policy implication that comes out of this result is that, in contrast to previous findings… human capital accumulation matters for the long run wellbeing of developed nations.”

Weakness’ of the study acknowledged by the authors include the limited number of countries in the study, the exclusion of several rapidly-developing countries in southern and eastern Europe from the study, the endpoint of the study in 1995, and the inconsistent alternate measures for human investment.

Countries included in the study were: Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy, Netherlands, Norway, New Zealand, Sweden, Switzerland, United Kingdom, and the United States.

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