A country's welfare depends on its ability to accumulate cognitive and noncognitive human capital. However, we do not fully understand what makes some countries successful at producing human capital and even struggle with measurement. e.g. international test scores are informative about the cognitive dimension but neglect the non-cognitive dimension. In this paper, we develop a multi-country, open-economy general-equilibrium framework in which countries' ability to turn resources into human capital along the cognitive and non-cognitive dimensions is revealed by the endogenous educational and occupational choices of its citizens and their subsequent performance on international exams. Our model allows us to estimate countries' underlying productivities of cognitive and non-cognitive human capital. We find that high test scores do not necessarily imply high cognitive productivities (e.g. Switzerland, Hong Kong) and that many countries with low test scores have high non-cognitive productivities (e.g. the U.S. and U.K.). We then aggregate over these two dimensions to construct a single educational quality index, and illustrate its intuition using an iso-education-quality curve. We use our model to decompose variation in output per capita across countries into a component involving the educational quality index and another involving output TFP. This exact decomposition shows that the differences in cognitive and noncognitive productivities across countries have large implications for differences in output per worker. These results help quantify the potential payoffs of education policies and clarify their objective; e.g. excessive attention to test scores may decrease aggregate output. International trade plays an important role in our model because the gains from trade help to compensate a country for uneven productivity across human capital types. In counterfactual exercises, we show that if barriers to trade are completely eliminated, we would obtain a very different iso-education-quality curve. This implies large improvements of overall education quality, and large gains from trade, for the countries with strong comparative advantages in producing cognitive (e.g. S. Korea would gain 30.1% to 44.1% of its output) or non-cognitive human capital (e.g. the Netherlands would gain 18.8% to 55.6%).
↧