The contribution of rising school quality to U.S. economic growth

Abstract

U.S. public school expenditures per pupil increased by a factor of 9 during the 20th century. This paper quantifies how much U.S. labor quality has grown due to the rise in educational spending. A schooling model and cross-sectional earnings variations across cohorts are exploited to identify the effect of the increased school expenditures on labor quality growth. The findings are that (i) U.S. labor quality increased by 0.4% per year between 1967 and 2000, one-fifth of which is attributable to the rise in educational spending; and (ii) labor quality growth explains one-quarter of the rise in labor productivity.