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Knowledge Capital and Aggregate Income Differences: Development Accounting for US States

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  • Eric A. Hanushek
  • Jens Ruhose
  • Ludger Woessmann

Abstract

Improvement in human capital is often presumed to be important for state economic development, but little research links better education to state incomes. We develop detailed measures of worker skills in each state that incorporate cognitive skills from state- and country-of-origin achievement tests. These new measures of knowledge capital permit development accounting analyses calibrated with standard production parameters. Differences in knowledge capital account for 20-30 percent of the state variation in per capita GDP, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses. These estimates support school improvement as a strategy for state economic development.

Suggested Citation

  • Eric A. Hanushek & Jens Ruhose & Ludger Woessmann, 2017. "Knowledge Capital and Aggregate Income Differences: Development Accounting for US States," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(4), pages 184-224, October.
  • Handle: RePEc:aea:aejmac:v:9:y:2017:i:4:p:184-224
    Note: DOI: 10.1257/mac.20160255
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    1. Knowledge Capital and Aggregate Income Differences: Development Accounting for U.S. States
      by maximorossi in NEP-LTV blog on 2016-09-28 23:33:06

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    Cited by:

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    More about this item

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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