>This report examines the rationale for putting investment in human capital at the forefront of policies aimed at promoting economic growth and social cohesion, as is done in the strategy outlined in the Lisbon Summit for turning the EU into the most competitive and dynamic knowledge-based economy in the world. On the basis of a review of the relevant academic literature, we reach the following broad conclusions. First, investment in human capital contributes significantly to productivity growth. Second, there is clear evidence that human capital plays a key role in fostering technological change and diffusion. Third, human capital investment appears attractive relative to alternative assets, both from the individual and from the aggregate perspectives. Fourth, policies that raise the quantity and quality of the stock of human capital are compatible with increasing social cohesion. On the whole, our findings suggest that investment in people is both a crucial growth factor, particularly in the current context of rapid technological change, and a key instrument for enhancing social cohesion, and are therefore supportive of the policy strategy set out in Lisbon.
This article reviews the literature on the relationship of economic growth to the education levels of the labor force. The emphasis is on Yoram Ben-Porath's contribution to some of the issues in this field: the endogeneity of schooling, the role of the public sector as an 'absorber' of educated labor, and the importance of personal human capital created by investments in reputation and personal relationships, the F-connection.
This paper summarizes and tries to reconcile evidence from the microeconometric and empirical macro growth literatures on the effect of schooling on income and GDP growth. Much microeconometric evidence suggests that education is an important causal determinant of income for individuals within countries. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This discrepancy appears to be a result of the high rate of measurement error in first-differenced cross-country education data. After accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. Another finding of the macro growth literature--that economic growth depends positively on the initial stock of human capital--is not robust when the assumption of a constant-coefficient model is relaxed.
The theoretical, conceptual, and practical difficulties with the use of cross national data on schooling are so large it is reasonable to avoid using this type of aggregate data for any purpose for which individual level data would do. There are, however, three questions for which the use of cross national data on schooling is necessary and could potentially help answer interesting questions. First, explaining the cross national differences in the evolution and dynamics of output growth is an important agenda. Do differences in the evolution and dynamics of schooling help explain the big facts about output growth? Largely, no. Second, the existence and magnitude of output externalities to schooling is an important question with at least normative policy implications, and evidence for externalities requires at least some level of spatial aggregation. Does the cross-national data provide support for output externalities? Largely, no. Third, cross national (or more broadly spatially aggregated) data allows the exploration of the impact on returns to schooling (or in the gap between private and social returns) of differences in economic environments. This last question has been and seems a promising line for future research.
We offer an extensive summary and a critical discussion of the empirical literature on the impact of human capital on macroeconomic performance, with a particular focus on UK policy. We also highlight methodological issues and make recommendations for future research priorities. Taking the studies as a whole, the evidence that human capital increases productivity is compelling, though still largely divided on whether the stock of education affects the longrun level or growth rate of GDP. A oneyear increase in average education is found to raise the level of output per capita by between three and six percent according to augmented neoclassical specifications, while leading to an over one percentage point faster growth according to estimates from the newgrowth theories. Still, over the shortrun planning horizon (four years) the empirical estimates of the change in GDP are of similar orders of magnitude in the two approaches. The impact of increases at different levels of education appear to depend on the level of a country's development, with tertiary education being the most important for growth in OECD countries. Education is found to yield additional indirect benefits to growth. More preliminary evidence seems to indicate that type, quality and efficiency of education matter for growth too.
Recent theoretical contributions to the growth literature emphasize the role of human capital in the process of economic growth. Meanwhile, the empirical literature on the link between human capital and growth has changed course several times over the last decade. On balance, the evidence now seems to indicate that educational expansion does contribute to output growth. There also appear to be grounds for thinking that human capital has a substantial impact on technological catch-up, possibly through improving a country’s capacity to adopt new technologies. However, the literature is subject to many methodological and conceptual weaknesses, such as the inadequacy of empirical human capital proxies and reverse causality. Therefore, these conclusions have to be considered preliminary and fragile.
This paper provides a survey of work on the link between education and economic growth.It shows that data from the early 20th century are coherent with conclusions about education and economic growth derived from the much more recent past. It also presents an analysis of the role of education in facilitating the use of best-practice technology.
Why do growth rates differ? This paper surveys the recent empirical literature on economic growth, starting with a discussion of stylized facts, data problems, and statistical methods. Six research questions are emphasized, drawing on growth and convergence research. In answering these questions, the paper argues that efficiency has grown at different rates across countries, casting doubt on neoclassical models in which technology is a public good. The latter half of the paper rounds up a variety of findings before providing answers to all six questions, including a short summary of how differences in growth rates arise.
This paper surveys the empirical literature on the growth effects of education and social capital. The main focus is on the cross-country evidence for the OECD countries, but the paper also briefly reviews evidence from labour economics, to clarify where empirical work on education using macro data may be relatively useful. It is argued that on balance, the recent cross-country evidence points to productivity benefits of education that are at least as large as those identified by labour economists. The paper also discusses the implications of this finding. Finally, the paper reviews the emerging literature on the benefits of social capital. Since this literature is still in its early days, policy conclusions are accordingly harder to find.
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A review of the measures of the stock of human capital used in empirical growth research - including adult literacy rates, school enrollment ratios, and average years of schooling of the workingage population - reveals that human capital is mostly poorly proxied. The simple use of the most common proxy, average years of schooling, misspecifies the relationship between education and the stock of human capital. Based on human capital theory, the specification of human capital is extended to allow for decreasing returns to education and for differences in the quality of a year of education. The different specifications give rise to hugely differing measures of the stock of human capital across countries, and developmentaccounting results show that misspecified human capital measures can lead to severe underestimation of the development effect of human capital.
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