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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 would be inconsistent with observed levels education subsidies

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1408.

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Length: 19 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:kie:kieliw:1408

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Keywords: Augmented Solow model; education externalities; Mincer equation;

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References

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Cited by:
  1. 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.
  2. Bjarne S. Jensen & Ulla Lehmijoki, 2011. "Homothetic Multisector Growth Models," DEGIT Conference Papers c016_001, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Rasmus Thönnessen & Erich Gundlach, 2013. "The size of human capital externalities: cross-country evidence," Public Choice, Springer, vol. 157(3), pages 671-689, December.
  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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