WHICH has provided a better return in recent decades: America’s stockmarket or education? The latter, according to a research review by George Psacharopoulos and Harry Patrinos for the World Bank. The

two economists looked at 1,120 studies, across 139 countries, and came up with an annual average “rate of return”—actually a pay premium, the increase in hourly earnings from an extra year of schooling—of 8.8%. The analogy is inexact, but for comparison America’s stockmarket returned an annual 5.6% over the past 50 years.

Their figure excludes social gains, such as lower mortality rates associated with greater education. The premium is higher for girls and for primary education. It is also higher in poor countries, presumably because the smaller the share of educated people, the higher the pay they can command. The same reasoning suggests that the return should have dwindled as educational attainment rose. Instead, it has stayed strong, especially for higher education (see chart).

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Some researchers have posited that technological advances have displaced some skilled workers, who have then in turn displaced less-skilled ones, leaving their relative positions in the pecking order—and thus the return to their extra education—little changed. Mr Psacharopoulos and Mr Patrinos are more sanguine. They think the world is witnessing a “race between education and technology”. A rising number of degree-holders has tended to push returns down, but rising demand for higher-level skills, driven by the speed of technological change, has worked in the opposite direction. Technology seems to have been winning.

Rising returns increase the incentive to invest in education. Governments and individuals seem to be responding. Public spending on education as a share of GDP is growing; private education, both at school and tertiary level, is booming. The beneficiaries are people who have access to education, either because they live in rich, well-governed countries or because they can afford to pay privately for it. Rising returns, says Mr Patrinos, signal to individuals to invest more. But they also mean that anyone who does not will fall further behind. “Either way, the conclusion is the same: invest now.”

This article appeared in theFinance and economicssection of the print edition under the headline"Smart investment"