Working Paper: NBER ID: w21295
Authors: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
Abstract: Improvement in human capital is often presumed important for state economic development, but little research links better education to state incomes. We develop detailed measures of worker skills in each state that incorporate cognitive skills from state- and country-of-origin achievement tests. These new measures of knowledge capital permit development accounting analyses calibrated with standard production parameters. Differences in knowledge capital account for 20-30 percent of the state variation in per-capita GDP, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses. These estimates support school improvement as a strategy for state economic development.
Keywords: Knowledge Capital; Aggregate Income Differences; Development Accounting; US States
JEL Codes: I25; J24; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| knowledge capital (O36) | per capita GDP (E20) |
| school attainment (I21) | per capita GDP (E20) |
| cognitive skills (G53) | per capita GDP (E20) |
| (school attainment + cognitive skills) (J24) | per capita GDP (E20) |