Literacy Skills and Economic Performance In Canada – They have become an even more important determinant of economic growth

We pool expanded international data from the PIAAC survey of adult skills across Canadian provinces and other participating countries to replicate the IALS-based analysis by Coulombe, Tremblay and Marchand (2004) as well as Coulombe and Tremblay (2006) based on more recent and more comprehensive data on the literacy skills of the adult population. Our results from panel estimations over the period 1970-2015 suggest that literacy skills have become an even more important determinant of economic growth than was suggested by the IALS analysis covering the period 1960-1995. Our estimates imply long-run elasticities of GDP per capita with respect to literacy of about 3. This means that in the long run a one-percent increase in literacy translates into a three-percent increase in GDP per capita. Short-run elasticities are also substantial. A closer inspection of the data additionally reveals that investment in the human capital of women appears to have a much stronger effect on subsequent growth than investment in the human capital of men. Our results also suggest that reducing the proportion of low skilled adults yields a positive effect on economic growth. We also find that skills are somewhat less important for economic performance in Canada than in other developed countries; at the same time, low literacy proficiency of the population appears to be less detrimental for economic performance in Canada than elsewhere in the world.

Chosen excerpts by Job Market Monitor. Read the whole story @ Literacy and Growth: New Evidence from PIAAC