## The Power of Education Policy

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**Canonical URL:** [The Power of Education Policy](https://www.imf.org/en/publications/fandd/issues/2025/03/the-power-of-education-policy-amory-gethin)

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## Bibliographic details
- Authors: AMORY GETHIN
- Published: March 3, 2025

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### Overview and key findings
- Education has been a central driver of global poverty reduction over the past four decades.
- 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, according to the World Bank.
- 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 (Gethin 2023).
- Education was responsible for 60–70 percent of real income growth among the world’s poorest 20 percent in the author’s analysis.

### Evidence and methodology
- Built a microdata base of surveys conducted around 2019 by statistical institutes in 150 countries, covering labor forces and individual incomes, combined with historical educational attainment data since 1980.
- The sample represents 95 percent of the world’s population.
- Calculated how individual incomes increased with additional education for each country and education level, and measured how education affected income inequality.

### How education diminished poverty
- The doubling of global income per capita between 1980 and 2019 would have been only half as large without advances in educational attainment.
- Higher education expansion contributed importantly to inclusive growth by:
  - Allowing a broader group of workers to access high-skill jobs.
  - Freeing up lower-skill job opportunities and raising marginal productivity and wages for remaining workers in traditional sectors (e.g., agriculture).
- The aggregate and distributional effects of education depend on employers’ demand for skilled labor and interactions with technological change.

### Role of higher and postsecondary education
- Contrary to conventional wisdom, returns per year of schooling are not necessarily greater at lower education levels:
  - In India, a year of primary education increases earnings by 2–3 percent.
  - In India, a year of secondary education increases earnings by 6–8 percent over the earnings of someone with only primary education.
  - In India, a year of postsecondary education increases earnings by more than 13 percent over those of a person with secondary education alone.
- Expanding access to higher education can generate significant indirect positive spillovers for less-educated workers, particularly from postsecondary education, reflecting substantial unmet demand for highly skilled labor in some countries.
- Trade-offs noted: higher education is generally more expensive per student, and highly skilled workers are more likely to emigrate.

### Quantity versus quality
- 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.
- Education quality, based on internationally comparable test scores, stagnated over this period.
- Empirical example: India’s District Primary Education Program (implemented in 1994) significantly expanded access to primary education with no effect on education quality, yet generated a 13 percent increase in earnings per year of schooling (Khanna 2023).
- Conclusion: education quantity, not quality alone, was central to global poverty reduction since 1980.

### Interaction with technology and future outlook
- Technological advances in recent decades disproportionately benefited highly skilled workers; education expansion was necessary to realize broad-based gains from these advances.
- Without educational expansion, technological change would have produced little growth and would have benefited a much narrower set of skilled workers.
- New technologies such as AI offer large opportunities for productivity growth and innovation, but benefits depend on creating a sufficiently large skilled labor force.
- Education and innovation policy should be coordinated; expanded access to education is likely to be particularly beneficial given major developments in AI and other technologies.

### Policy implications and recommendations
- Continue expanding access to education—particularly secondary and postsecondary education—to promote both equity and efficiency.
- In shaping education policy, authorities should:
  - Pay close attention to the dramatic differences in returns to different levels of schooling.
  - Consider the projected evolution of labor demand and complementarities with technology adoption.
  - Promote policies that encourage the adoption of new technologies alongside education expansion.
- Recognize trade-offs: resource costs of higher education and risks of emigration for highly skilled graduates must be factored into policy design.

_Amory Gethin, "The Power of Education Policy," F&D Magazine, March 2025._

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_Source: https://www.imf.org/en/publications/fandd/issues/2025/03/the-power-of-education-policy-amory-gethin_