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Measurement Error in Education and Growth Regressions

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  • Alessie, Rob
  • Portela, Miguel
  • Teulings, Coen N

Abstract

The perpetual inventory method used for the construction of education data per country leads to systematic measurement error. This paper analyses the effect of this measurement error on GDP regressions. There is a systematic difference in the education level between census data and observations constructed from enrolment data. We discuss a methodology for correcting the measurement error. The standard attenuation bias suggests that using these corrected data would lead to a higher coefficient. Our regressions reveal the opposite. We discuss why the measurement error yields an overestimation. Our analysis contributes to an explanation of the difference between regressions based on 5 and on 10-year first-differences.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4637.

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Date of creation: Sep 2004
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Handle: RePEc:cpr:ceprdp:4637

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Keywords: education; growth; measurement error;

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References

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  1. Thijs van Rens, 2002. "Education, Growth and Income Inequality," CESifo Working Paper Series 653, CESifo Group Munich.
  2. Daniel Cohen & Marcelo Soto, 2001. "Growth and Human Capital: Good Data, Good Results," OECD Development Centre Working Papers 179, OECD Publishing.
  3. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
  4. Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1995. "A new database on human capital stock in developing and industrial countries: Sources, methodology, and results," Journal of Development Economics, Elsevier, vol. 46(2), pages 379-401, April.
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  8. Casey B. Mulligan & Xavier Sala-i-Martin, 1994. "Measuring aggregate human capital," Economics Working Papers 112, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1995.
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  16. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  17. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
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  20. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  21. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
  22. Arellano, Manuel, 1993. "On the testing of correlated effects with panel data," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 87-97, September.
  23. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  24. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
  25. Topel, Robert, 1999. "Labor markets and economic growth," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 44, pages 2943-2984 Elsevier.
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Citations

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Cited by:
  1. Coen N. Teulings & Thijs van Rens, 2002. "Education, Growth and Income Inequality," Tinbergen Institute Discussion Papers 02-001/3, Tinbergen Institute, revised 05 Mar 2003.
  2. Christian Morrisson & Fabrice Murtin, 2009. "The Century of Education," CEP Discussion Papers dp0934, Centre for Economic Performance, LSE.
  3. Mazhar MUGHAL & Natalia VECHIU, 2010. "The role of Foreign Direct Investment in higher education in the developing countries (Does FDI promote education?)," Working Papers 2010-2011_10, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2010.
  4. Tiago Sequeira & Elsa Martins, 2008. "Education public financing and economic growth: an endogenous growth model versus evidence," Empirical Economics, Springer, vol. 35(2), pages 361-377, September.
  5. Sunde, Uwe & Vischer, Thomas, 2011. "Human Capital and Growth: Specification Matters," Economics Working Paper Series 1131, University of St. Gallen, School of Economics and Political Science.
  6. repec:hal:wpaper:halshs-00586751 is not listed on IDEAS
  7. Bas van Leeuwen & Peter Földvari, 2011. "Capital accumulation and growth in Central Europe, 1920-2006," Working Papers 0023, Utrecht University, Centre for Global Economic History.
  8. Delgado, Michael S. & Henderson, Daniel J. & Parmeter, Christopher F., 2012. "Does Education Matter for Economic Growth?," IZA Discussion Papers 7089, Institute for the Study of Labor (IZA).
  9. Joachim Ragnitz & Stefan Eichler & Beate Grundig & Harald Lehmann & Carsten Pohl & Lutz Schneider & Helmut Seitz & Marcel Thum, 2007. "Die demographische Entwicklung in Ostdeutschland : Gutachten im Auftrag des Bundesministeriums für Wirtschaft und Technologie," ifo Dresden Studien, Ifo Institute for Economic Research at the University of Munich, number 41, October.
  10. Bergheim, Stefan, 2007. "Pair-wise cointegration in long-run growth models," Research Notes 24, Deutsche Bank Research.
  11. Tiago Neves Sequeira & Nuno Ferraz, 2008. "Is Education prejudiced by Country-Risk? A Panel-Data Study using Attainment Data and Country-Risk as a Rational Expectation," Working Papers de Gestão, Economia e Marketing (Management, Economics and Marketing Working Papers) e01/2008, Universidade da Beira Interior, Departamento de Gestão e Economia (Portugal).

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