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The Augmented Solow Model with Mincerian Schooling and Externalities

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  • Kai Carstensen
  • Erich Gundlach
  • Susanne Hartmann

Abstract

We combine the augmented Solow model with the Mincer equation to derive a specification that identifies an education externality within a production function framework. The previous empirical literature has not reached a consensus about the size of the education externality, which is given by the difference between the microeconomic and the macroeconomic return to education. Relative to our benchmark value that is based on a parameterization of the derived specification, we find that the estimated education externality is too large when the empirical model is not properly restricted, and appears to be absent when all control variables of the empirical model are properly accounted for. We note that the absence of an education externality is difficult to reconcile with observed levels of education subsidies for efficiency reasons. Copyright 2009 The Authors. Journal Compilation 2009 Verein für Socialpolitik and Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 10 (2009)
Issue (Month): (November)
Pages: 448-463

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Handle: RePEc:bla:germec:v:10:y:2009:i::p:448-463

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  1. Pritchett, Lant, 2006. "Does Learning to Add up Add up? The Returns to Schooling in Aggregate Data," Handbook of the Economics of Education, Elsevier.
  2. Barro, Robert J. & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1994. "Capital Mobility in Neoclassical Models of Growth," CEPR Discussion Papers 1019, C.E.P.R. Discussion Papers.
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  7. Cohen, Daniel & Soto, Marcelo, 2001. "Growth and Human Capital: Good Data, Good Results," CEPR Discussion Papers 3025, C.E.P.R. Discussion Papers.
  8. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
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  12. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  13. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, May.
  14. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  15. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  16. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  17. John W. McArthur & Jeffrey D. Sachs, 2001. "Institutions and Geography: Comment on Acemoglu, Johnson and Robinson (2000)," NBER Working Papers 8114, National Bureau of Economic Research, Inc.
  18. Dennis D. Kimko & Eric A. Hanushek, 2000. "Schooling, Labor-Force Quality, and the Growth of Nations," American Economic Review, American Economic Association, vol. 90(5), pages 1184-1208, December.
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Cited by:
  1. Rasmus Thönnessen & Erich Gundlach, 2013. "The size of human capital externalities: cross-country evidence," Public Choice, Springer, vol. 157(3), pages 671-689, December.
  2. Bjarne S. Jensen, 2009. "Dynamic Extensions of the Solow Growth Model (1956): Editorial," German Economic Review, Verein für Socialpolitik, vol. 10, pages 378-383, November.
  3. Bjarne S. Jensen & Ulla Lehmijoki, 2011. "Homothetic Multisector Growth Models," DEGIT Conference Papers c016_001, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Tomasz Brodzicki, 2012. "Augmented Solow Model with Mincerian Education and Transport Infrastructure Externalities," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 6(2), pages 155-170, July.

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