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Returns to Investment in Education in the OECD Countries: Does Governance Quality Matter?

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Abstract

This paper shows labor market returns to investment in education as an essential component of the knowledge economy taking into account the quality of governance of the Organisation for Economic Co-operation and Development countries. Using panel data models, we found strong support for such a tradeoff, especially for tertiary education. The empirical results suggest that returns of education expenditure improve the labor market outcomes only to the extent that the quality of the institutions in the countries is sufficiently high. This implies that the level of governance quality affects education spending, which determines their effect on the unemployment rate.

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Notes

  1. The International Standard Classification of Education is an instrument which makes it possible to compile comparable education statistics at an international level.

  2. The first uses the “collapse” sub-option for the xtabond2 command in STATA. The second uses certain delays rather than all the delays available as instruments.

  3. See Nguyen et al. (2018) and Hayat (2019).

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  1. Unit of Research C.O.D.E.C.I, Faculty of Economics and Management of Sfax, University of Sfax, Airport Road Km 4, 3018, Sfax, Tunisia

    Marwa Sahnoun

  2. Faculty of Economics and Management of Sfax, University of Sfax, Airport Road Km 4, 3018, Sfax, Tunisia

    Chokri Abdennadher

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  1. Marwa Sahnoun
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Appendix

Appendix

Table 3 Countries list (28 OECD countries)
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Table 4 Summary of variables, descriptions, and sources
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Table 5 Descriptive statistics
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Table 6 Simple correlations
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Table 7 Main results of ‘principal component analysis’
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Sahnoun, M., Abdennadher, C. Returns to Investment in Education in the OECD Countries: Does Governance Quality Matter?. J Knowl Econ 13, 1819–1842 (2022). https://doi.org/10.1007/s13132-021-00783-0

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