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Why and How Education Affects Economic Growth

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  • Joseph Zeira

Abstract

This paper suggests an additional channel through which education affects economic growth. If growth is driven by industrialization of production, where machines replace labor in a growing number of tasks, then operating these machines requires workers who are educated, namely literate and know arithmetic, whose human capital is less specific and more general. As a result, technology adoption depends negatively on wages of educated workers. Hence, economic growth depends negatively on the cost of education or on the barriers to acquire education. The model shows that if the cost of education is high, economic growth might be slow and even stop completely, creating a development trap. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd.

Suggested Citation

  • Joseph Zeira, 2009. "Why and How Education Affects Economic Growth," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 602-614, August.
  • Handle: RePEc:bla:reviec:v:17:y:2009:i:3:p:602-614
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    1. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
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    4. Gilles Saint-Paul, 2006. "Distribution and Growth in an Economy with Limited Needs: Variable Markups and 'the End of Work'," Economic Journal, Royal Economic Society, vol. 116(511), pages 382-407, April.
    5. Zeira, Joseph, 2007. "Wage inequality, technology, and trade," Journal of Economic Theory, Elsevier, vol. 137(1), pages 79-103, November.
    6. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    7. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 563-606.
    8. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 469-497.
    9. François Bourguignon & Christian Morrisson, 2002. "Inequality Among World Citizens: 1820-1992," American Economic Review, American Economic Association, vol. 92(4), pages 727-744, September.
    10. Paul Beaudry & Fabrice Collard, 2002. "Why has the Employment-Productivity Tradeoff among Industrialized Countries been so strong?," NBER Working Papers 8754, National Bureau of Economic Research, Inc.
    11. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    12. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
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    Cited by:

    1. Berdugo, Binyamin & Meir, Uri, 2009. "Education, Rent Seeking and Growth," MPRA Paper 18369, University Library of Munich, Germany.
    2. Battisti, Michele & Di Vaio, Gianfranco & Zeira, Joseph, 2013. "Global Divergence in Growth Regressions," CEPR Discussion Papers 9687, C.E.P.R. Discussion Papers.
    3. Oscar Iván Ávila Montealegre, 2013. "Política fiscal, desigualdad y crecimiento económico," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, August.
    4. Ralph Hippe & Roger Fouquet, 2015. "The human capital transition and the role of policy," GRI Working Papers 185, Grantham Research Institute on Climate Change and the Environment.

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