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Is Location Fate?

Distributional Aspects of Schooling

Eric Hanushek

May 2014, English

Eric A. Hanushek analyzes the impact of human capital on economic outcomes, arguing that cognitive skills are a better measure of human capital than years of schooling. He focuses on urban schools because large urban school districts account for a disproportionate number of students, particularly black and Hispanic students. Hanushek notes that while differences in high school attainment rates and scores on NAEP among whites, blacks, and Hispanics have converged somewhat, the “gaps in achievement are truly stunning.”

Based on his literature review, he concludes that the average black worker suffers a 13 percent loss of income each year of his or her work life due to the black-white achievement gap, while the average Hispanic worker suffers a 10 percent loss. Hanushek was also able to estimate the impact of eliminating these achievement gaps on U.S. economic growth. If the United States were to pursue policies that raised the cognitive skills of black and Hispanic students to the level of white non-Hispanic students, average GDP would increase by about 7 percent. As he notes, this is an enormous return to investment in education.

Hanushek goes on to examine what the current literature says about the causes of achievement gaps. He discusses racial concentrations, teacher quality, and early childhood education as potential determinants of educational achievement and concludes, “Perhaps the strongest and most consistent finding of recent research is the importance of teacher quality in student achievement.”

His paper ends with an assessment of various ways to address achievement gaps, although he is not optimistic about any of the policy alternatives, including expanded school choice through charter schools. Charter schools can provide options for low-income families whose alternatives were previously limited to either residential relocation or private schools. However, research to date has found that charter schools have an uncertain impact on student performance. The best empirical studies have found “a small average difference in achievement growth between charter schools and their corresponding traditional public schools, with large numbers of both very good and very bad charter schools.”

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2013 and is Chapter 2 of the book Education, Land, and Location.


Economic Development, Economics, Inequality, Poverty, Public Policy, Segregation