Why is education more important today than ever? Innovation

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Student reading a book Investing in education can help countries spur innovation and important technological advancements. Copyright: Sarah Farhat/The World Bank

The competitiveness of an economy depends a lot on technological progress, but recent data in some countries, including not only high-income but also middle-income countries, suggests that innovation is getting harder, and the pace of growth is slowing down. A new challenge, then, is to understand what conditions are most effective in supporting innovation, so countries can support their best and brightest to advance technology and lead innovative work that helps boost economies.

Education and mobility

The main findings of status attainment research—which studies how an individual’s family background relates to her educational and occupational attainment and income—show that an individual’s status originates in the education, occupation, and income of his or her parents, in particular fathers. At the same time, the individual’s income is also explained by his or her level of education and occupation status, as described many years ago in the seminal book The American Occupational Structure by Blau and Duncan. On the other hand, economists studying human capital theory have emphasized for decades how education correlates to income and have concluded that education increases the productivity of individuals by increasing their skills, as was proposed by Gary Becker. This can be done by investing in people.

This basic model describes the process by which family status and education were converted into occupational status through educational attainment even after controlling by ability, and has implications for how we develop and implement education policy. The results of many studies show that education has a significant positive influence on the occupational and income attainment process. These findings are consistent with human capital theory, where education explains individual productivity after ability is controlled, showing that it has an independent effect on productivity. The results have been similar in developed and developing countries where access to education, including higher education, for example, still is restricted to people with low socioeconomic status.

Education, innovation and technology

Today, there is agreement that education, independent of innate ability, helps spur innovation and technology, and it contributes to productivity and economic growth. A key element in this process is that education is important to adopt the technology that produces innovation. Parental education and a person’s education affect productivity, directly or indirectly, and independently of many other characteristics. In consequence, policymakers in countries that want to remain competitive in the globalized economy need to make sure that the education system takes this into account and supports quantitative indicators (enrollments) and qualitative ones, including the number of Ph.D. graduates, the strongest education indicator of technology and innovation. In the long term, when it comes to spurring innovation, it is more important subsidize PhD students than R&D. This would help produce the sort of technology and innovation that could give us the next generation of mRNA vaccines or medicines to treat intractable diseases. It could produce the next generation of AI tools or maybe the next generation of IBM Watson.

Without fair access to education, we are constraining the possibilities for a country to develop. All countries need to ensure that everybody starts with the right steps early on and moves thru the education cycles according to their capabilities. To do this, countries should equalize opportunities so that individuals, their families, and communities will benefit. Some countries like Finland, Singapore, and Korea, for example, have done it. In a generation, they were able to break the parent-child cycle in terms of access to quality education and access to higher education.

Investing in education boosts innovation

This is important because the findings relate to how innovation and education policy affect individual career choices and aggregate productivity. Emerging studies indicate that subsidies to R&D, a typical policy to support technology/innovation, have a clear strong impact in the short term, but its effect tends to decrease in the longer term. Subsidies to education, however, have a stronger effect on technology and innovation in the long term. A challenge is how to support students to successfully complete Ph.D. programs. These students will be more successful in developing technology and innovation. The literature indicates that expanding access to basic skills, improving the quality of education, and investing in universities may do the trick. These policies help individuals who would have been innovators anyway to become more successful; and allow creative individuals who would otherwise not have become inventors to reach their potential, widening the talent pipeline.

The World Bank is contributing towards improvements in technology and by expanding support to experiences that have been successful in increasing access to higher education, such as the projects that support loans for low-income students so that they can attend higher education in certified institutions. It also supports improving research capacity at the university level, including a series of projects that supported the Millennium Science Initiative. This initiative—initially in Latin America and the Caribbean, but most recently in sub-Saharan Africa—expands doctoral and post-doctoral training to promote scientific excellence and produce better and more qualified science and engineering graduates. It also aims to produce higher quality and more relevant research for firms to utilize these outputs to improve productivity, such as the Millennium Science Initiative project in Uganda. The World Bank is also investing in highly sophisticated technology to strengthen higher education and research universities, including with the Higher Education and Research for Innovation and Competitiveness (HERIC) project in Montenegro.


Eduardo Velez Bustillo

Consultant, Education Sector, World Bank

Harry A. Patrinos

Senior Adviser, Education

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