The goal of this project is to quantify the costs to economic development of inadequate education in Germany. The “costs of inadequate education” are calculated as “missing” economic effects of better education, i.e. by a comparison of the present economic re-sults with those that would have occurred if education had not been inadequate.
Following modern growth theory, the model framework for calculating the economic costs of inadequate education is a macroeconomic model in which the educational competence level – as measured by PISA results, for example – has an influence on the longterm growth of an economy. The positive effect of this approach is that all economic effects of education can be represented and also the longterm character of the educational effects can be included in the calculation. For this it is necessary to discount future economy flows to an actual value in the present. In addition, the educational level not only has an impact on the level of the economic output but also on its rate of change. In such a dynamic model framework the computed effect depends on the chronological positioning of an education reform. For this reason, different scenarios and variants are calculated for these projections.
For the quantification of the follow-up costs, recourse will be made to the work of Hanushek and Woessmann ( 2008, 2009), who calculate the longterm growth effects of cognitive test performance. The study combines the coefficients of education calculated by Hanushek and Woessmann with relevant definitions of inadequate education in Germany and corresponding reform scenarios in order to calculate a sum for the follow-up costs of inadequate education in Germany. We also carry out separate calculations for the individual German federal states.
The projection models an education reform that reduces – beginning in the year 2010 – inadequate education within 10 years by 90 percent. The projection covers all economic returns that accrue over the lifetime of a child that is born today, i.e. over a time horizon until 2090.
The economic returns of such an education reform amount to about 2.8 trillion Euro. In 2090, the GDP will be 10 percent higher because of the reform compared to the GDP without such a reform. The costs of inadequate education vary considerably across the individual German federal states. Quantitatively, the costs are highest in Northrhine-Westphalia with about 791 billion Euro. As a fraction of GDP the costs are lowest in Saxony with 71 percent and highest in Northrhine-Westphalia with 146 percent. This enormous growth potential should be a great incentive for all federal states to improve their education policy.
Piopiunik, Marc and Ludger Wößmann, "Volkswirtschaftliche Folgekosten unzureichender Bildung: Eine makroökonomische Projektion", in: G. Quenzel, K. Hurrelmann (ed.): Bildungsverlierer – Neue Ungleichheiten, VS Verlag, 2010, p. 463 - 473
Piopiunik, Marc and Ludger Wößmann, "Economic follow-up costs of inadequate education: a macroeconomic projection" ifo Schnelldienst 63 (4), 2010, 24-30 (Abstract / Download ).
The study and additional material can be downloaded at www.bertelsmann-stiftung.de/bildung-wirtschaftswachstum.
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