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Matching Up The Data On Education With Economic Growth Models

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Author Info

  • Chris Papageorgiou

    ()
    (Louisiana State University)

  • Fidel Pérez Sebastián

    ()
    (Universidad de Alicante)

Abstract

The growth literature has not yet established how data on education should be introduced in theories involving human capital. Early work used enrolment rates as a proxy of human capital whereas more recently it has utilized measures of average educational attainment taking advantage of new data sets. This paper examines alternative specifications of human capital that may match up with the existing data on education. First, we present a standard neoclassical two-sector growth model that adopts a human capital specification proposed in recent papers. In this model the fraction of individual's time endowment in school is viewed as an investment rate. We show that the optimally chosen educational attainment predicted by the calibrated model is very high and does not correspond to the data. Next, we consider two extensions of the basic model: (a) allow for different elasticities of substitution between skilled and unskilled labor, (b) introduce work experience. We find that neither of the two extensions are able to generate plausible predictions. Finally, we propose an alternative specification of human capital based on a law of motion of educational attainment that successfully matches up with the data.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2002-23.pdf
File Function: Fisrt version / Primera version, 2002
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2002-23.

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Length: 24 pages
Date of creation: Nov 2002
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2002-23

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Keywords: Educational attainment; Economic Growth.;

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References

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  1. Casey B. Mulligan & Xavier Sala-i-Martin, 1995. "Measuring Aggregate Human Capital," NBER Working Papers 5016, National Bureau of Economic Research, Inc.
  2. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  3. 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.
  4. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  5. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  6. Charles I. Jones, . "Convergence Revisited," Working Papers 96006, Stanford University, Department of Economics.
  7. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  8. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  9. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
  10. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
  11. Charles I. Jones, 2002. "Sources of U.S. Economic Growth in a World of Ideas," American Economic Review, American Economic Association, vol. 92(1), pages 220-239, March.
  12. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  13. Attanasio, Orazio P & Weber, Guglielmo, 1993. "Consumption Growth, the Interest Rate and Aggregation," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 631-49, July.
  14. Perez-Sebastian, Fidel, 2000. "Transitional dynamics in an R&D-based growth model with imitation: Comparing its predictions to the data," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 437-461, April.
  15. Klenow, Peter J. & Rodriguez-Clare, Andres, 1997. "Economic growth: A review essay," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 597-617, December.
  16. Alan B. Krueger & Mikael Lindahl, 1999. "Education for Growth in Sweden and the World," NBER Working Papers 7190, National Bureau of Economic Research, Inc.
  17. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
  18. Schultz, T.P., 1990. "Returns To Women'S Education," Papers 603, Yale - Economic Growth Center.
  19. Temple, Jonathan R. W., 2001. "Generalizations that aren't? Evidence on education and growth," European Economic Review, Elsevier, vol. 45(4-6), pages 905-918, May.
  20. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
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Citations

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Cited by:
  1. Michael S. Delgado & Daniel J. Henderson & Christopher F. Parmeter, 2011. "Does Education Matter for Economic Growth?," Working Papers 2011-13, University of Miami, Department of Economics.
  2. 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.

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