## The Power of Education Policy

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**Canonical URL:** [The Power of Education Policy](https://www.imf.org/-/media/files/publications/fandd/article/2025/03/gethin.pdf)

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### Overview
- Global GDP per capita doubled in real terms over the past four decades.
- The proportion of the world’s population living below the international poverty line of $2.15 a day dropped from 44 percent in 1981 to 9 percent in 2022.
- Education has been a central driver of these developments, generating large productivity gains and disproportionately benefiting the global poor.

### Education and Poverty Reduction — key quantitative findings
- Education accounts for fully half of total economic growth and two-thirds of real income gains among the world’s poorest 20 percent since 1980.
- The doubling of global income per capita between 1980 and 2019 would have been only half as large without advances in educational attainment.
- Education was responsible for 60–70 percent of real income growth among the world’s poorest 20 percent (1980–2019).
- From 1980 to 2019:
  - The share of the world’s citizens with no schooling declined from 35 percent to 15 percent.
  - The share of adults with at least some secondary education grew from 25 percent to 60 percent.
- India’s District Primary Education Program (implemented in 1994) significantly expanded access to primary education with no effect on measured education quality, yet it generated a 13 percent increase in earnings per year of schooling.

### Mechanisms and distributional effects
- Expansion of education increases the supply of skilled workers, enabling broader sharing of high-skill jobs and freeing lower-skill job opportunities.
- In economies with large traditional sectors and small modern sectors, schooling allows some workers to move into high-skill jobs while raising productivity and wages of those who remain in agriculture.
- Education interacts with technological change:
  - Skill-biased technological advances raised demand for skilled labor.
  - Without educational expansion, technological change would have generated little growth and would have benefited a narrower, more skilled subset of workers.
  - Conversely, without technological progress, education would have had significantly lower effects on economic growth.

### Returns to schooling (evidence on levels of education)
- Returns per year of schooling are not necessarily higher at lower levels of education. Example estimates for India:
  - A year of primary education increases a person’s earnings by 2–3 percent.
  - A year of secondary education increases earnings by 6–8 percent over the earnings of someone with only primary education.
  - A year of postsecondary education increases earnings by more than 13 percent over those of a person with secondary education alone.
- High returns to postsecondary education point to substantial unmet demand for highly skilled labor and imply significant indirect positive spillovers to less-educated workers.

### Quality versus quantity
- Internationally comparable test scores show particularly low education quality in developing economies and stagnation in quality over time.
- However, quantity of education (expanded access) was central to global poverty reduction from 1980 to 2019.
- Case evidence (India’s District Primary Education Program) suggests large income gains from expanded access even without measurable improvements in test-score quality.
- Policymakers often assume a fixed average return of 10 percent to education; in the presence of technological progress, returns are much larger and context-dependent.

### Policy implications and recommendations
- Continue expanding access to high-quality secondary and postsecondary education to enhance both equity and efficiency.
- Shape education policy with attention to:
  - Dramatic differences in returns across schooling levels.
  - Projected evolution of labor demand and skill needs driven by technological change.
- Pair education expansion with policies that facilitate adoption of AI and other technologies, given the close interdependence between education and other economic dimensions.
- Recognize trade-offs:
  - Higher education is generally more expensive per student.
  - Highly skilled workers are more likely to emigrate after completing their studies.
- Prioritize complementary policies so that education expansion translates into broad-based inclusive growth.

*Source: Amory Gethin, "The Power of Education Policy", F&D, March 2025.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/03/gethin.pdf_