The PISA studies in recent years have disclosed fundamental problems in the educational and training systems of many countries. According to the studies, it seems that simply increasing the education expenditures per pupil regularly does not sufficiently achieve better pupil performances. This "input-oriented" policy does not have any direct effect on the output in the form of better results by the pupils. Therefore, it is the objective of this essay to analyze the framework conditions in which an education system can develop optimally so that the pupils achieve better grades and/or performance at schools. We focus our analysis on the institutional factors such as "competition in the school system," "school autonomy," "responsibility," as well as a suitable combination of these factors. The research results of international empirical studies discussed in this paper provide a range of approaches and proposals that governments could use as a guide or as a "cornerstone" for the design of their schools and education systems.Keywords: PISA, education, human capital, school performance Necessary Rethinking of Education and Training PolicyOver the last few years, politicians in many European countries have been made aware of the problems in their schools and education systems by the PISA studies. According to the investigations, increasing the educational spending per student regularly does not satisfactorily achieve better student performance. Investments do not reach the pupils in the end because they disappear in bureaucratic processes. This is partly due to the opportunistic behavior of school managers and teachers. This "input-oriented" policy does not have any direct effects on the output in the form of better results by the pupils. Therefore, governments and politicians generally need to change their thinking to improve the qualitative approaches of education. This was done in part by the European Qualifications Framework (EQF) in April 2008 for instance. The EQF has an "output-based" view and refers to what pupils actually learned and what kind of knowledge and skills they acquired after completing their training programs. It is the responsibility of the state to create the corresponding framework in which the school and training system can develop optimally so that pupils, and in turn, their schools, perform well. Therefore, it is absolutely necessary that the state provides many incentives for those responsible for education to take appropriate measures in order to improve the quality of education and thereby increase the pupil output. Within this context, institutional factors play a central role, which will be further discussed later in this paper.In this essay, different aspects are presented and analyzed in order to make suggestions regarding how to improve education and training policy. Basically, the objective is to maximize the student performances, which are evaluated by international tests such as PISA and TIMSS. For this purpose, we use suitable empirical studies. Our analysis focuses on ins...