Center for Economics and the Environment: Policy Series
It seems common sense that the more educated someone is, the greater the chances that they will have relatively higher incomes. Indeed, on average someone with a college degree is more likely will have a higher lifetime stream of earnings than someone who only graduates from high school. Does this same relationship hold at the state level? Are states with better education outcomes also the states that tend to grow faster? More specifically, what does the evidence on Missouri’s educational achievement predict for the state’s economic future?
We investigate whether differences in economic growth across states are in part explainable by differences in educational attainment. We measure state economic growth as the percentage change of real GDP per capita. Two measures of educational outcomes are used. One uses the level of educational attainment, such as a high school diploma or a bachelor’s degree, by the adult population in each state. The other measure is an aggregate measure of state-specific results from standardized tests for math; specifically, the results of the math portion of the National Assessment of Educational Progress (NAEP).
To summarize the results, we find that states with a larger percentage of high school degree holders tend to be states that experienced faster rates of economic growth in subsequent years. When we consider the relation between the real aim of education—an increase in individuals’ cognitive ability—and economic growth, we find an even stronger positive relationship. States with higher scores on the NAEP tests also tend to be the states with higher growth rates in real GDP. The evidence thus suggests that the greater the level of educational attainment for a state’s population, the greater are the chances that they will as a group, be more economically successful.
Our results have important implications for Missouri’s economic future. Missouri ranks in the lower half of all states when comparing the percent of the adult population holding high school and college degrees. Moreover, Missouri students’ achievement on the NAEP tests over time is among the lowest in the nation. This uninspiring record of educational success surely is one part of the puzzle that explains why Missouri’s economic growth record over the past 15 years places it near the bottom of all states.
The blunt message from this study is that until the educational system in Missouri builds a stronger foundation of educational attainment and enhancing cognitive skills, do not expect long-term progress anytime soon in the state’s economic standard of living.
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Hafer, R. W., "Are Education And Economic Growth Related? Some Evidence From The States" (2017). Center for Applied Economics. 24.