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Human capital investment: the returns from education and training to the individual, the firm and the economy

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Author Info

  • Richard Blundell

    ()
    (Institute for Fiscal Studies and University College London)

  • Lorraine Dearden

    ()
    (Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London)

  • Costas Meghir

    ()
    (Institute for Fiscal Studies and University College London)

  • Barbara Sianesi

    ()
    (Institute for Fiscal Studies)

Abstract

This paper provides a non-technical review of the evidence on the returns to education and training for the individual, the firm and the economy at large. It begins by reviewing the empirical work that has attempted to estimate the true causal effect of education and training on individual earnings, focusing on the recent literature that has attempted to control for potential biases in the estimated returns to education and training. It then moves on to review the literature that has looked at the returns from human capital investments to employers. Lack of suitable data and methodological difficulties have resulted in a paucity of studies that have carried out sound empirical work on this issue. In the final part of the review, we look at the work that has tried to assess the contribution of human capital to national economic growth at the macroeconomic level. This work has generally involved using either a ‘growth accounting’ theoretical framework or ‘new growth’ theories. Although the empirical macroeconomic evidence that accompanies this work does not generally allow one to distinguish between the two approaches, there is a substantial body of evidence on the contribution of education to economic growth.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 20 (1999)
Issue (Month): 1 (March)
Pages: 1-23

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Handle: RePEc:ifs:fistud:v:20:y:1999:i:1:p:1-23

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  1. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(2), pages 143-173, October.
  2. McKinley L. Blackburn & David Neumark, 1991. "Omitted-Ability Bias and the Increase in the Return to Schooling," NBER Working Papers 3693, National Bureau of Economic Research, Inc.
  3. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1989. "Job Matching and On-the-Job Training," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 7(1), pages 1-19, January.
  4. Black, Sandra E & Lynch, Lisa M, 1996. "Human-Capital Investments and Productivity," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 263-67, May.
  5. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 501-26, May.
  6. Bishop, John H, 1990. "Job Performance, Turnover, and Wage Growth," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 8(3), pages 363-86, July.
  7. Ann P. Bartel, 1991. "Productivity Gains From the Implementation of Employee Training Programs," NBER Working Papers 3893, National Bureau of Economic Research, Inc.
  8. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, And Ability: Evidence From A New Sample Of Identical Twins," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(1), pages 253-284, February.
  9. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 584-609, June.
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