Rising inequality and sluggish growth in the United States and the lack of sustained economic advancement in many low-income countries of the world are major challenges for economists and policy-makers. Many believe that investment in education is a key instrument both to improve growth and distribute widely the proceeds of growth. The exact nature of the relationship between productivity growth, education levels, and income inequality, however, is actually little understood, and the worldwide evidence is mixed. The historical experience of contemporary industrialized countries and the recent experience of newly industrializing countries in Asia appear to suggest that investments in schooling are critical determinants of economic growth. These economies invested heavily in schooling as their economies grew at rapid rates and now are characterized by high average levels of schooling and widely shared prosperity. On the face of it, schooling appears to be a worthwhile investment indeed. However, the recent experience of many other countries presents a mixed picture, suggesting that schooling is not a sufficient condition for economic growth. For example, many countries with relatively high levels of schooling compared to their level of development in the 1960s, such as the Philippines, Sri Lanka, Ar-
gentina, Costa Rica, Cuba, and Uruguay, did not subsequently achieve high growth rates over the next twenty-five years.!