Simulating the impact of a raise in education salaries on economic growth in Peru

A simulation shows that increasing teacher salaries is likely to be (very) profitable for Peru. The required investments have in the long run a substantial return in economic growth as higher salaries would lead to higher teacher cognitive skills, which in turn impact student achievement. We suggest that international development banks should develop products for education finance with a long period (60 years or more) before repayments must be made.

Keywords: Education, Return over investment, Economic growth, GDP, PISA, Cognitive Skills, Teachers, Development finance

JEL Classification: C63, H52, I25, O15, O21, O24, N36