A Reevaluation of the Effect of Human Capital Accumulation on Economic Growth: Using Natural Disasters as an Instrument

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A Reevaluation of the Effect of Human Capital Accumulation on Economic Growth: Using Natural Disasters as an Instrument

Author Info

Raymond Robertson () (Department of Economics, Macalester College)
Mark Skidmore () (Department of Economics, University of Wisconsin - Whitewater)
Hideki Toya () (Faculty of Economics, Nagoya City University)

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Abstract

Theoretic growth models and microeconomic evidence suggest that human capital accumulation is an important determinant of per capita income growth. However, outliers, measurement errors, and incorrect specifications may have affected early macroeconomic studies that found a weak relationship between growth and human capital accumulation. While recent studies addressing these problems are beginning to show larger positive effects, the potential endogeneity of human capital accumulation has received relatively little attention. In this paper, we demonstrate that endogeneity is significant and find that natural disasters are a good instrument for changes in schooling. Our resulting instrumental variable estimates are larger than our OLS estimates and are generally larger than those in previous studies. Our analysis also provides some limited evidence of human capital externalities.

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Paper provided by UW-Whitewater, Department of Economics in its series Working Papers with number 05-08.

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Length: 39 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:uww:wpaper:05-08

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This paper has been announced in the following NEP Reports:

NEP-AFR-2005-12-20 (Africa)
NEP-ALL-2005-12-20 (All new papers)
NEP-DEV-2005-12-20 (Development)
NEP-HRM-2005-12-20 (Human Capital & Human Resource Management)
NEP-MAC-2005-12-20 (Macroeconomics)

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