Skill-Specific rather than General Education: A Reason for US--Europe Growth Differences?
AbstractIn this paper, we develop a model of technology adoption and economic growth in which households optimally obtain either a concept-based, "general" education or a skill-specific, "vocational" education. General education is costly to obtain, but enables workers to operate new production technologies. Firms weigh the cost of adopting and operating new technologies against increased profits and optimally choose the level of adoption. We show that an economy whose policies favor vocational education will grow slower in equilibrium than one that favors general education. More importantly, the gap between their growth rates will increase with the growth rate of available technology. By characterizing the optimal Ramsey education policy we also demonstrate that the optimal subsidy for general education increases with the growth rate of available technology. Our theory suggests that European education policies that favored specialized, vocational education might have worked well, both in terms of growth rates and welfare, during the 1960s and 1970s when available technologies changed slowly. However, in the information age of the 1980s and 1990s when new technologies emerged at a more rapid pace, they might have contributed to an increased growth gap relative to the United States.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economic Growth.
Volume (Year): 9 (2004)
Issue (Month): 2 (06)
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Web page: http://www.springerlink.com/link.asp?id=102931
Other versions of this item:
- Dirk Krueger & Krishna B. Kumar, 2003. "Skill-specific rather then General Education: A Reason for US-Europe Growth Differences?," NBER Working Papers 9408, National Bureau of Economic Research, Inc.
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
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