Degrees of Development

• Author: Rabah Arezki and Marc Quintyn
• Position: a Senior Economist in the IMF’s Research Department, and is a Division Chief in the IMF’s Institute for Capacity Development.

Education of the population is generally viewed as a key ingredient for economic growth. Economists have emphasized three main channels through which education theoretically induces economic growth. Education increases labor force productivity, which raises the level of output. It enables technological innovation, which promotes economic growth through improved inputs, enhanced processes, and better products. And it facilitates the transmission of knowledge and the adoption of new technologies, which also enhance economic growth.Â

While that may seem to be a self-evident proposition, empirical research on the relationship between education and development is far from conclusive. That may be because education is not being measured properly. Research into the empirical relationship between education and economic outcomes has traditionally used measures based on the average number of years of schooling of the general population (see Box 1). But such measures have been criticized because they capture only the number of years of schooling without considering the quality of that education. When learning (as measured by cognitive skills) is examined, there is a much stronger association between education and economic growth (Hanushek and Woessmann, 2008).Â

In nearly all countries, the state plays a major role in decisions that affect economic growth. A state’s ability to govern intelligently and honestly—its capacity, as economists say—is crucial to development. But analysis of the educational attainment of the general population—whether quantitative or qualitative—may not be useful in assessing education as a factor in the role of the state in economic development. The educational attainment of civil servants may differ from that of the general population. Researchers have already focused on leadership and shown that educational attainment at the top does matter for economic growth (Jones and Olken, 2005; Besley, Montalvo, and Reynal-Querol, 2011). But while leaders set the tone and direction of government, they do not run it.

We focused on the next level down, looking at the quality of education of public servants—those officials who influence policy design and implementation on a day-to-day basis. We found that higher educational attainment among civil servants is associated with higher state governing capacity, resulting in better decisions and, ultimately, better development outcomes. We were able to measure educational attainment by assembling a unique database from the curricula vitae (CVs) of more than 100,000 civil servants who applied to the IMF for economics training over the past three decades (see Box 2).

By documenting the differences in the quality of public servants’ education among countries, we should gain additional insight into why economies develop along different paths. We also further explore why some countries end up with a higher-quality civil service and argue that the adoption of merit-based compensation in public...