Barro (1991) and others find that growth and schooling are highly correlated across countries, with each additional year of 1960 enrollment associated with about .6% per year faster growth in per capita GDP from 1960 to 1990. In a model with finite-lived individuals who choose schooling, schooling can influence growth, but also faster technology-driven growth can induce more schooling by raising the effective rate of return on investment in schooling. We consider a variety of evidence to determine the strength of these channels, with two main findings. First, faster-growing countries have at most modestly flatter cross-sectional experience-earnings profiles, consistent with a minority role for the channel from schooling to growth. Second, we calibrate the model using evidence from the labor literature and employ UNESCO attainment data to construct schooling going back well before 1960. We find the channel from schooling to growth to be too weak to generate even half of Barro's coefficient under a range of plausible parameter values. The reverse channel from expected growth to schooling, in contrast, is capable of explaining the empirical relationship. We conclude that the evidence favors a dominant role for the reverse channel from growth to schooling.
We document that countries with higher initial education levels experienced faster value-added and employment growth in schooling-intensive industries in the 1980s and 1990s. This effect is robust to controls for other determinants of international specialization and becomes stronger when we focus on economies open to international trade. Our finding is consistent with schooling fostering the adoption of new technologies if such technologies are skilled-labor augmenting, as was the case in the 1980s and the 1990s. In line with international specialization theory, we also find that countries where education levels increased rapidly experienced stronger shifts in production toward schooling-intensive industries.
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The relative roles of factor inputs and productivity are estimated in explaining the level of economic development. For a large sample of countries, it is shown that international differences in factor inputs account for between two thirds and three quarters of international differences in output per worker if alternative identifying productivity assumptions and a quality-adjusted measure of human capital are employed. For a sample of OECD countries, it is found that all differences in output per worker can be attributed to differences in factor inputs, leaving no role for international productivity differences. This result supports the reasoning of a traditional neoclassical growth model.
Output per worker varies enormously across countries. Why? On an accounting basis our analysis shows that differences in physical capital and educational attainment can only partially explain the variation in output per worker-we find a large amount of variation in the level of the Solow residual across countries. At a deeper level, we document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which we call social infrastructure. We treat social infrastructure as endogenous, determined historically by location and other factors captured in part by language.
The purpose of this paper is to measure the impact of investment in education on U.S. economic growth. Education is treated as an investment in human capital, since benefits accrue to an educated individual over a lifetime of activities. One of the most important benefits is higher income from labor market participation. This is the key to understanding the link between investment in education and economic growth. The authors most important finding is that investment in human and nonhuman capital accounts for an overwhelming proportion of the growth of the U.S. economy during the postwar period. Educational investment will continue to predominate in the investment requirements for the more rapid growth.
In our view there has been a "Neoclassical Revival" in growth economics spurred by the empirical findings of Mankiw, Romer, and Weil (1992), Barro and Sala-I-Martin (1995), and Young (1994 and 1995). By this we mean a revival of the neoclassical growth model, which features a common level of productivity but different levels of human and physical capital across countries, as a viable candidate for explaining the major part of country differences in levels and growth rates of output per worker. Marshaling existing evidence from the labor literature on the returns to schooling and experience, we construct new measures of human capital across countries. We find that productivity differences are the dominant source of the large international dispersion in levels and growth rates of output per worker. We conclude that, although models that focus on physical and human capital are clearly important, research needs to be re-focused on explaining the causes of productivity differences across countries.
No question has perhaps attracted as much attention in the economics literature as “Why are some countries richer than others?” In this paper, we revisit the development problem and reevaluate the role of human capital. The key difference between our paper and recent work in this area is that we use theory to estimate the stocks of human capital, and that we allow the quality of human capital to vary across countries. When quality differences are allowed, we find that effective human capital per worker varies substantially across countries. As a result of this finding, we estimate that cross-country differences in Total Factor Productivity (TFP) are significantly smaller than those reported in previous studies. Moreover, our model implies that output per worker is highly responsive to differences in TFP and in demographic variables.
This book presents a thorough economic analysis of both the determinants and the consequences of international differences in schooling quality. It is shown that cross-country differences in quality-adjusted human capital can account for a substantial part of the international variation in economic development. However, large increases in per-student spending over recent decades were not matched by increases in student achievement in most countries. In a simple principal-agent model, the book stresses the importance of institutional features of the schooling system such as central examinations, school autonomy, and private-sector competition. Microeconometric estimations based on data for more than a quarter of a million students reveal that international differences in these institutions, rather than differences in resources, can explain the large international differences in schooling quality.
This paper documents the fundamental role played by factor accumulation in explaining the extraordinary postwar growth of Hong Kong, Singapore, South Korea, and Taiwan. Participation rates, educational levels, and (excepting Hong Kong) investment rates have risen rapidly in all four economies. In addition, in most cases there has been a large intersectoral transfer of labor into manufacturing, which has helped fuel growth in that sector. Once one accounts for the dramatic rise in factor inputs, one arrives at estimated total factor productivity growth rates that are closely approximated by the historical performance of many of the OECD and Latin American economies. While the growth of output and manufacturing exports in the newly industrializing countries of East Asia is virtually unprecedented, the growth of total factor productivity in these economies is not.
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